<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1997
REGISTRATION NO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
THE GSI GROUP, INC. DAVID MANUFACTURING CO.
(EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS
SPECIFIED IN ITS CHARTER) SPECIFIED IN ITS CHARTER)
IOWA
(STATE OR OTHER JURISDICTION
DELAWARE OF INCORPORATION OR ORGANIZATION)
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)
3523
3523 (PRIMARY STANDARD
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION NO.)
INDUSTRIAL CLASSIFICATION NO.)
42-0920500
37-0856587 (I.R.S. EMPLOYER
(I.R.S. EMPLOYER IDENTIFICATION NO.)
IDENTIFICATION NO.)
1600 12TH STREET N.E.
1004 EAST ILLINOIS STREET MASON CITY, IOWA 50401
ASSUMPTION, ILLINOIS 62510 (515) 423-6182
(217) 226-4421 (ADDRESS, INCLUDING ZIP CODE, AND
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
PRINCIPAL EXECUTIVE OFFICES)
--------------
JOHN W. FUNK
CHIEF FINANCIAL OFFICER
THE GSI GROUP, INC.
1004 EAST ILLINOIS STREET
ASSUMPTION, ILLINOIS 62510
(217) 226-4421
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
COPIES TO:
PAUL W. THEISS
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603-3441
(312) 782-0600
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
- -------------------------------------------------------------------------------
10 1/4% Senior
Subordinated Notes due
2007 of The GSI Group,
Inc. ................ $100,000,000 100% $100,000,000 $30,303.03
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Guarantee of 10 1/4%
Subordinated Notes due
2007 by David
Manufacturing Co. ... $100,000,000 (2) (2) None
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended.
(2) Pursuant to Rule 457(n), no additional consideration will be paid for the
Guarantee.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 23, 1997
PROSPECTUS
THE GSI GROUP, INC.
OFFER TO EXCHANGE
ALL 10 1/4% SENIOR SUBORDINATED NOTES DUE 2007 WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 FOR ALL OUTSTANDING 10 1/4% SENIOR SUBORDINATED
NOTES DUE 2007 ($100,000,000 PRINCIPAL AMOUNT OUTSTANDING)
The Exchange Offer (as defined) and withdrawal rights will expire at 5:00
p.m., New York City time, on , 1998 (as such date may be extended, the
"Expiration Date").
The GSI Group, Inc., a Delaware corporation (the "Company"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus, as
it may be amended and supplemented from time to time (this "Prospectus"), and
the accompanying Letter of Transmittal (the "Letter of Transmittal," and
together with the Prospectus, the "Exchange Offer"), to exchange an aggregate
of up to $100,000,000 principal amount of its 10 1/4% Senior Subordinated Notes
due 2007 (the "New Notes"), which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement of which this Prospectus is a part, for an identical principal amount
of its outstanding 10 1/4% Senior Subordinated Notes due 2007 (the "Old Notes")
(the Old Notes and the New Notes are collectively referred to herein as the
"Notes") of the Company from the holders thereof in integral multiples of
$1,000. See "The Exchange Offer."
The Company will accept for exchange any and all Old Notes that are validly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date.
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date, otherwise such tenders are irrevocable. The
Exchange Offer is not conditioned upon any minimum principal amount of the Old
Notes being tendered for exchange. However, the Exchange Offer is subject to
certain customary conditions and to the terms and provisions of the
Registration Rights Agreement, dated as of November 5, 1997 (the "Registration
Rights Agreement"), among the Company, David Manufacturing Co. ("DMC") and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Morgan Stanley & Co., Incorporated (the "Initial Purchasers"). See "The
Exchange Offer" and "Registration Rights."
(continued on next page)
-----------
SEE "RISK FACTORS" ON PAGES 13 THROUGH 19 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY HOLDERS IN EVALUATING THE EXCHANGE OFFER.
-----------
THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 1998
<PAGE>
An aggregate of $100 million principal amount of Old Notes were sold by the
Company to the Initial Purchasers on November 5, 1997 (the "Issue Date")
without registration under the Securities Act, in reliance upon exemptions
therefrom, pursuant to a Purchase Agreement, dated October 30, 1997 (the
"Purchase Agreement"), among the Company and the Initial Purchasers. The
Initial Purchasers subsequently resold the Old Notes in reliance on Rule 144A
under the Securities Act ("Rule 144A") and Regulation S under the Securities
Act ("Regulation S"). The Company and the Initial Purchasers also entered into
the Registration Rights Agreement, pursuant to which the Company granted
certain registration rights for the benefit of the holders of the Old Notes.
The Old Notes were, and the New Notes will be, issued under the Indenture,
dated as of November 1, 1997 (the "Indenture"), between the Company and
LaSalle National Bank, as trustee (in such capacity, the "Trustee"). As of the
date of this Prospectus, there are $100,000,000 aggregate principal amount of
Old Notes outstanding. The form and terms of the New Notes will be identical
in all material respects to the form and terms of the Old Notes, except that
(i) the New Notes have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof, (ii)
holders of New Notes will not be entitled to any increase in the interest rate
("Additional Interest") thereon pursuant to certain circumstances under the
Registration Rights Agreement and (iii) holders of New Notes will no longer be
entitled to certain other rights under the Registration Rights Agreement.
Interest on the New Notes is payable semiannually in arrears on each May 1
and November 1, commencing May 1, 1998. Holders whose Old Notes are accepted
for exchange will have the right to receive interest accrued thereon from the
date of their original issuance or the last interest payment date, as
applicable, to, but not including, the date of issuance of the New Notes, such
interest to be payable with the first interest payment on the New Notes.
Interest on the Old Notes accepted for exchange will cease to accrue on the
day prior to the issuance of the New Notes. The New Notes will mature on
November 1, 2007. See "Description of the New Notes--Maturity, Interest and
Principal."
The New Notes will be redeemable at the option of the Company, in whole or
in part, at any time on or after November 1, 2002, at the redemption prices
set forth herein, plus accrued and unpaid interest thereon, if any, to the
date of redemption. In addition, on or prior to November 1, 2000, the Company
may redeem up to 35% of the originally issued aggregate principal amount of
the Notes, at a redemption price of 110.25% of the principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the redemption date, with
the net proceeds of an Equity Offering (as defined herein); provided, that not
less than $65.0 million in aggregate principal amount of New Notes is
outstanding immediately after giving effect to such redemption. Following the
occurrence of a Change of Control (as defined herein), the Company will be
required to make an offer to repurchase the New Notes at a price equal to 101%
of the principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the date of purchase. See "Description of the New Notes--Optional
Redemption" and "--Change of Control."
The New Notes will represent unsecured senior subordinated obligations of
the Company and will be subordinated in right of payment to all existing and
future Senior Indebtedness (as defined herein) of the Company. The New Notes
also will be fully and unconditionally guaranteed (the "DMC Guarantee") on an
unsecured senior subordinated basis by DMC, which is a wholly-owned subsidiary
of the Company. As of September 30, 1997, on a pro forma basis after giving
effect to the offering of the Old Notes (the "Offering"), the application of
the net proceeds therefrom and the DMC Acquisition (as defined herein), the
Company would have had approximately $6.9 million of Senior Indebtedness
outstanding. In addition, at September 30, 1997, on a pro forma basis after
giving effect to the Offering, the application of the net proceeds therefrom
and the DMC Acquisition, the Company's subsidiaries would have had
approximately $6.0 million of indebtedness to which holders of the Notes would
have been effectively subordinated.
The New Notes are being offered hereby in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement. The
Company is making the Exchange Offer in reliance on the position of
i
<PAGE>
the staff of the Securities and Exchange Commission (the "Commission") as set
forth in certain interpretive letters addressed to third parties in other
transactions. However, the Company has not sought its own interpretive letter
and there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Commission, the Company believes that New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by a holder (other than (i) a broker-dealer
who purchased Old Notes directly from the Company for resale pursuant to Rule
144A or any other available exemption under the Securities Act, (ii) an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or (iii) a broker-dealer who acquired the Old Notes as a result of market-
making or other trading activities), without further compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided, that such holder is acquiring the New Notes in the ordinary course
of business and is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of the New Notes. Holders wishing to accept the Exchange Offer
must represent to the Company, as required by the Registration Rights
Agreement, that such conditions have been met. Any holder of Old Notes who is
not able to rely on the interpretations of the staff of the Commission set
forth in the above-mentioned interpretive letters must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale of such Old Notes, unless such sale is made pursuant
to an exemption from such requirements. See "The Exchange Offer-- Resales of
New Notes."
Each broker-dealer who receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it acquired the Old Notes for its own
account as a result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Notes. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Based on the position taken by the staff of
the Commission in the interpretive letters referred to above, the Company
believes that broker-dealers who acquired Old Notes for their own accounts as
a result of market-making or other trading activities ("Participating Broker-
Dealers") may fulfill their prospectus delivery requirements with respect to
the New Notes received upon exchange of such Old Notes (other than Old Notes
that represent an unsold allotment from the original sale of the Old Notes)
with a prospectus meeting the requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such New
Notes. Accordingly, this Prospectus may be used by a Participating Broker-
Dealer in connection with resales of New Notes received in exchange for Old
Notes where such Old Notes were acquired by such Participating Broker-Dealer
for its own account as a result of market-making or other trading activities.
Subject to certain provisions set forth in the Registration Rights Agreement,
the Company has agreed that this Prospectus may be used by a Participating
Broker-Dealer in connection with resales of such New Notes. See "Plan of
Distribution." However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of New Notes received in exchange for
Old Notes pursuant to the Exchange Offer must notify the Company, or cause the
Company to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided
for that purpose in the Letter of Transmittal or may be delivered to the
Exchange Agent at one of the addresses set forth herein under "The Exchange
Offer--Exchange Agent; Assistance." Any Participating Broker-Dealer who is an
"affiliate" of the Company may not rely on such interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. See "The Exchange
Offer--Resales of New Notes."
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Company of
the occurrence of any event or the discovery of any fact which makes any
statement contained in this Prospectus untrue in any material respect or which
causes this Prospectus to omit to state a material fact necessary in order to
make the statements contained herein, in light of the circumstances under
which they were
ii
<PAGE>
made, not misleading or of the occurrence of certain other events specified in
the Registration Rights Agreement, such Participating Broker-Dealer will
suspend the sale of New Notes pursuant to this Prospectus until the Company
has amended or supplemented this Prospectus to correct such misstatement or
omission and has furnished copies of the amended or supplemented Prospectus to
such Participating Broker-Dealer or the Company has given notice that the sale
of the New Notes may be resumed, as the case may be.
The New Notes issued pursuant to this Exchange Offer will be issued in the
form of a Global New Note (as defined herein), which will be deposited with,
or on behalf of, The Depository Trust Company ("DTC") and registered in its
name or in the name of Cede & Co., its nominee. Beneficial interests in the
Global New Note representing the New Notes will be shown on, and transfers
thereof will be effected through, records maintained by DTC and its
participants. Notwithstanding the foregoing, Old Notes held in certificated
form, if any, will be exchanged solely for Certificated New Notes (as defined
herein). After the initial issuance of the Global New Note, Certificated New
Notes will be issued in exchange for interests in the Global New Note only on
the terms set forth in the Indenture. See "Description of the New Notes" and
"Book-Entry, Delivery and Form."
The Company will not receive any proceeds from this offering, but, pursuant
to the Registration Rights Agreement, the Company will bear certain
registration expenses. No underwriter is being utilized in connection with the
Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER
THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
iii
<PAGE>
AVAILABLE INFORMATION
The Company and DMC have jointly filed a registration statement on Form S-4
(together with any amendments thereto, the "Registration Statement") with the
Commission under the Securities Act with respect to the New Notes and the
related DMC Guarantee. This Prospectus, which constitutes a part of the
Registration Statement, omits certain information contained in the
Registration Statement and reference is made to the Registration Statement and
the exhibits and schedules thereto for further information with respect to the
Company and the New Notes offered hereby. This Prospectus contains summaries
of the material terms and provisions of certain documents and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such summary is qualified in its entirety by such
reference.
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon the
effectiveness of the Registration Statement, the Company will be subject to
the reporting requirements of the Exchange Act and the interpretations issued
thereunder by the staff of the Commission. The Registration Statement, such
reports and other information can be inspected and copied at the offices of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the following regional offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York 10048;
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Such material also may be accessed electronically by means
of the Commission's home page on the Internet (http://www.sec.gov).
So long as any of the Old Notes are outstanding, the Company will file with
the Commission, to the extent then permitted by the Commission, the annual
reports, quarterly reports and other documents that the Company would have
been required to file with the Commission pursuant to Sections 13(a) and 15(d)
of the Exchange Act if the Company was subject to such Sections, and the
Company will promptly provide to the Trustee copies of such reports and
documents; provided, however, that if the Company is for any reason unable to
make such filings it will make available, upon request, to any holder of Old
Notes or prospective purchaser of New Notes, the information specified in Rule
144(A)(d)(4) of the Securities Act.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus under "Prospectus Summary,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," in addition to certain statements contained
elsewhere in this Prospectus, are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 and are thus
prospective. Such "forward-looking statements" are subject to risks,
uncertainties and other factors that could cause actual results to differ
materially from future results expressed or implied by such forward-looking
statements. The most significant of such risks, uncertainties and other
factors are discussed under the heading "Risk Factors," on pages 13 through 19
of this Prospectus and holders of Notes are urged to carefully consider such
factors.
iv
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information, including the financial
statements and the notes thereto, appearing elsewhere in this Prospectus.
Unless otherwise indicated, all references in this Prospectus to the "Company"
refer to The GSI Group, Inc., a Delaware corporation, and its subsidiaries.
THE COMPANY
INTRODUCTION
The Company is a leading manufacturer and supplier of agricultural equipment
and services worldwide. The Company believes that it is the largest global
provider of both (i) grain storage bins and related drying and handling systems
and (ii) swine feed storage, feed delivery, confinement and ventilation
systems. The Company also is one of the largest global providers of poultry
feed storage, feed delivery, watering, ventilation, nesting, egg-handling and
hatching systems. The Company markets its agricultural products in
approximately 75 countries through a network of over 1,600 independent dealers
to grain, swine and poultry producers primarily under its GSI(R), AP(TM) and
Cumberland(R) brand names. The Company's current market position in the
industry reflects both the strong, long-term relationships the Company has
developed with its customers as well as the quality and reliability of its
products.
Craig Sloan, the Chief Executive Officer of the Company, founded its current
business in 1972. In 1995, the Company recruited additional management and in
1996, all of the capital stock of the Company was acquired by Mr. Sloan and
certain other executives of the Company. The Company's new management-led
ownership has implemented a growth strategy designed to position the Company as
the premier worldwide manufacturer and supplier of high-quality, cost efficient
grain, swine and poultry systems. In addition to capitalizing on domestic and
international growth opportunities, the Company's new management has focused on
profitability, production efficiencies and cost reductions commenced during
1995. As a result, the Company has experienced rapid growth in recent years.
Net sales and operating income increased from $141.2 million and $4.0 million,
respectively, in 1995 to $178.5 million and $14.1 million, respectively, in
1996, and were $172.0 million and $16.5 million, respectively, for the nine
months ended September 30, 1997. Income from continuing operations (excluding
the write-off of an affiliate receivable) plus interest expense (including
amortization of debt issuance costs), depreciation and amortization ("EBITDA")
increased from $7.9 million in 1995 to $17.6 million in 1996, and was $19.2
million for the nine months ended September 30, 1997. On a pro forma basis
after giving effect to the Offering, the application of the net proceeds
therefrom and the DMC Acquisition, EBITDA would have been $26.9 million for the
twelve months ended September 30, 1997.
The primary users of the Company's grain storage, drying and handling
products are farm operators or commercial businesses, such as the Archer-
Daniels-Midland Company and Cargill, Inc., that operate feed mills, grain
elevators, port storage facilities and commercial grain processing facilities.
The Company believes that its grain storage, drying and handling equipment is
superior to that of its principal competitors on the basis of strength,
durability, reliability, design efficiency and breadth of product offering. The
Company's feeding and ventilation systems are used primarily by growers that
raise swine and poultry, typically on a contract basis for large integrators
such as Murphy Family Farms, Perdue Farms Incorporated and Tyson Foods, Inc.
Because swine and poultry growers are partially compensated by integrators
based on the efficiency with which they convert feed to meat (the "feed-to-meat
ratio"), they seek to purchase systems which minimize the feed-to-meat ratio.
As a result of its proprietary designs, the Company believes that its swine and
poultry systems are the most effective in the industry in serving this customer
objective.
The industry in which the Company operates is characterized both domestically
and internationally by a few large companies, such as the Company, with broad
product offerings and numerous small manufacturers of niche product lines.
Domestically, the Company intends to build on its established presence in the
grain, swine
1
<PAGE>
and poultry markets. Internationally, the Company intends to capitalize on
growth opportunities arising from still-developing agricultural industries and
favorable trends in the demand for grain, poultry and swine products. The
Company believes that less functionally sophisticated and efficient grain
storage systems used by facilities located outside the U.S. and Western Europe,
which experience relatively high levels of grain spoilage and loss, are
increasingly likely to be replaced by more modern systems. The Company also
believes that the significant economic and population growth occurring in the
Company's international markets will continue to result in consumers devoting
larger portions of their income to improved and higher-protein diets,
stimulating stronger demand for poultry and, to a lesser extent, pork. The
Company believes that it is well-positioned to capture expected increases in
worldwide demand for its products resulting from these industry trends because
of its leading brand names, broad and diversified product lines, strong
distribution network and high-quality products. See "Business--Industry
Overview."
COMPANY STRENGTHS
MARKET LEADER. The Company believes that it is the largest global provider of
both (i) grain storage bins and related drying and handling systems and (ii)
swine feed storage, feed delivery, confinement and ventilation systems. The
Company also is one of the largest global providers of poultry feed storage,
feed delivery, watering, ventilation, nesting, egg-handling and hatching
systems. The Company intends to continue to build its market share by
capitalizing on its strong reputation and the growth trends in worldwide demand
for grain, swine and poultry production.
PROVIDER OF FULLY-INTEGRATED SYSTEMS. The Company offers a broad range of
products that permits customers to purchase all of their grain, swine and
poultry production needs from one supplier. The Company believes that providing
fully-integrated systems significantly lowers total production costs and
enhances producer productivity by offering compatible products designed to
promote synergies and achieve maximum operating results. Dealers who purchase
fully-integrated systems also benefit from lower administrative and shipping
costs and the ease of dealing with a single supplier. The Company intends to
maintain its position as a provider of fully-integrated systems by continuing
to offer the most complete line of products available within its markets and by
developing and introducing new products. See "Business--Products."
BRAND NAME RECOGNITION AND REPUTATION FOR QUALITY PRODUCTS AND SERVICE.
Through its manufacturing expertise and experience, the Company has established
recognition in its markets for the GSI(R), AP(TM) and Cumberland(R) brand
names. The Company seeks to protect the reputation for high quality,
reliability and specialized services that are associated with such brand names
through extensive quality control and customer feedback programs. The Company
believes that its reputation and recognized brand names, along with its
extensive distribution network, will assist it in its efforts to further
penetrate both the domestic and international markets in which the Company
operates.
EFFECTIVE AND ESTABLISHED DISTRIBUTION NETWORK. The Company believes that its
development of a highly effective and established distribution network affords
it significant competitive advantages. The Company's distribution network
consists of over 1,600 independent dealers that market the Company's products
in approximately 75 countries throughout the world. The breadth and scope of
the Company's distribution network makes its products readily available in each
of the Company's markets and lowers transportation costs for its customers.
Dealers are carefully selected and trained to ensure high levels of customer
service. In addition, the Company has experienced a very low turnover rate of
its dealers since the Company's inception, which promotes consistency and
stability to customers. See "Business--Product Distribution."
LONG-TERM ALLIANCES WITH CUSTOMERS. The Company has a history of developing
long-term alliances with customers who are market leaders in both the
industries and the geographic markets they serve. The Company works closely
with customers through all stages of product development in order to tailor
products and systems to meet each customer's unique needs, making substitutions
with competitor products more difficult. The
2
<PAGE>
Company's commitment to product quality, dedication to customer service and
responsiveness to changing customer needs have enabled the Company to develop
and strengthen long-term alliances with its customers. The strength of the
Company's customer relationships are demonstrated by the fact that over 45% of
the Company's 1996 domestic net sales derived from grain equipment were made to
customers who have purchased from the Company for at least 10 years. In
addition, the Company has entered into long-term supply agreements with two of
its largest customers, which arrangements the Company believes are unique in
the industry.
FLEXIBLE MANUFACTURING FACILITIES. The Company's facilities are designed to
be easily reconfigured to adapt to demand changes for any or all of the
Company's products. The Company's primary manufacturing facility, located in
Assumption, Illinois, consists of approximately 675,000 square feet and
operates on a 24-hour basis during peak production periods. The Company's
facilities employ state-of-the-art machines that have enhanced production
efficiency. The Company believes that its current facilities will accommodate
planned production increases as the Company experiences sales growth and
expands into new markets. See "Business--Facilities."
COMPANY OPERATED AND OWNED BY EXPERIENCED MANAGEMENT TEAM. The Company is led
by an experienced management team, the members of which have each worked in the
agricultural products industry for an average of 16 years. Craig Sloan, a
founder and the Chief Executive Officer of the Company, and each of the other
members of the Company's senior management team have invested in the Company
and together own all of its voting common stock. The Company believes that the
agricultural expertise of its management team, coupled with the corporate
culture promoted by a management-owned company, permit it to establish strong
customer relationships and respond quickly to market opportunities. See
"Management--Executive Officers and Directors" and "Ownership of Capital
Stock."
BUSINESS STRATEGY
The Company's objective is to capitalize on its strengths through the
implementation of its business strategy, which includes the following principal
elements:
CAPITALIZE ON GROWTH OPPORTUNITIES IN INTERNATIONAL MARKETS. International
sales increased from approximately $36.8 million in 1995 to approximately $55.5
million in 1996, and were approximately $43.5 million in the nine months ended
September 30, 1997. The Company intends to continue to leverage its worldwide
brand name recognition, leading market positions and international distribution
network to capture the significant demand for its products that exists in the
international marketplace. While the Company anticipates that sales will
continue to be generated worldwide, the Company is targeting the Far East,
Latin America and Eastern Europe, where it believes the greatest potential for
significant growth exists. The Company believes that increasing the diversity
of both its customer base and geographic coverage by expanding its
international operations will mitigate the effect of future reductions in
demand within any of its individual product lines, or within a particular
geographic selling region.
ENHANCE GROWTH THROUGH STRATEGIC ACQUISITIONS. The Company will continue to
selectively seek acquisitions with complementary product lines that offer the
opportunity to improve market penetration and profitability through integration
with the Company's existing businesses. The Company believes that the markets
in which it operates include single-product producers who may not be able to
effectively compete against larger, integrated producers, such as the Company,
but which might benefit from economies of scale resulting from a business
combination with the Company. The Company recently acquired all of the capital
stock of DMC, a leading manufacturer and supplier of grain drying and handling
equipment, to complement the Company's grain equipment product line.
CONTINUE DEVELOPMENT OF PROPRIETARY PRODUCT INNOVATIONS. The Company's
research and development efforts focus on the development of new and
technologically advanced products to respond to customer demands, changes in
the marketplace and new technology. The Company employs a strategy of working
closely with its
3
<PAGE>
customers and capitalizing on existing technology to improve existing products
and develop new value-added products. The Company believes that it has an
impressive record of new product development as is evidenced by its improved
Easy Access doors and Series 2000 dryers for grain bins, its Performer Fan(TM)
line of products for the swine industry, and its patented HI-LO(R) chicken
feeders and Delta Series(TM) turkey feeders. The Company intends to continue to
actively develop product improvements and innovations to more effectively serve
its customers. See "Business--Products."
CONTINUE PROFITABILITY ENHANCEMENTS. The Company plans to continue to
actively manage its business to improve cash flows by containing costs,
selectively expanding production and improving productivity. The Company's past
success in enhancing profitability is evidenced by an EBITDA margin for 1996 of
9.9%, compared to 5.6% for 1995, and an EBITDA margin of 11.1% for the nine
months ended September 30, 1997, compared to 10.3% for the corresponding period
in 1996.
DMC ACQUISITION
In furtherance of its business strategy, on November 5, 1997, the Company
acquired all of the capital stock of DMC (the "DMC Acquisition") for
approximately $19.3 million in cash.
DMC is a leading manufacturer and supplier of grain drying and handling
equipment. DMC manufactures equipment at its headquarters in Mason City, Iowa
and maintains six company-owned distribution facilities in Iowa, Nebraska,
Illinois, Arkansas, Indiana and South Dakota. DMC uses this distribution
network to market products to approximately 1,500 domestic and international
dealers. DMC recorded net sales and operating income of $26.0 million and $3.7
million, respectively, for the eleven months ended September 30, 1997.
Approximately 52% of DMC's net sales during such period were derived from
products manufactured by DMC, with the remaining portion derived from products,
including augers, fans, heaters, floor supports and bucket elevators and
conveyors, that were purchased from manufacturers other than the Company.
International sales comprised approximately 13.5% of DMC's net sales for the
eleven months ended September 30, 1997.
The Company believes that the DMC Acquisition has expanded the breadth of the
Company's grain equipment product line and will increase net sales and
operating income. Because the Company manufactures many of the products sold
but not manufactured by DMC, the Company supplies such products to DMC. The
Company will continue to leverage DMC's distribution network to increase sales
of the Company's swine equipment. In addition, the Company believes it can
increase sales of DMC products through dealers in the Company's distribution
network who currently handle products of competitors of DMC.
4
<PAGE>
THE EXCHANGE OFFER
Securities Offered.............. Up to $100,000,000 principal amount of the
Company's 10 1/4% Senior Subordinated Notes
due 2007, which have been registered under
the Securities Act. The terms of the New
Notes and the Old Notes are identical in all
material respects, except for certain
transfer restrictions, additional interest
provisions and certain other registration
rights relating to the Old Notes described
below under "--Description of New Notes."
The Exchange Offer.............. The Company is offering, upon the terms and
subject to the conditions set forth herein
and in the accompanying Letter of
Transmittal, to exchange $1,000 in principal
amount of the New Notes for each $1,000 in
principal amount of the outstanding Old
Notes. The issuance of the New Notes is
intended to satisfy obligations of the
Company contained in the Registration Rights
Agreement. As of the date of this Prospectus,
$100 million in aggregate principal amount of
the Old Notes is outstanding, the maximum
amount authorized by the Indenture for all
Notes. The Company will issue the New Notes
to holders that validly tender Old Notes on
or promptly after the Expiration Date. See
"The Exchange Offer--Terms of the Exchange
Offer."
Expiration Date................. 5:00 p.m., New York City time, on , 1998,
as the same may be extended. See "The
Exchange Offer--Expiration Date; Extensions;
Amendments."
Conditions of the Exchange
Offer; Extensions; Amendments..
The Exchange Offer is not conditioned upon
any minimum principal amount of Old Notes
being tendered for exchange. However, the
Exchange Offer is subject to certain
customary conditions and to the terms and
provisions of the Registration Rights
Agreement. The Company expressly reserves the
right, in its sole and absolute discretion,
(i) to delay accepting any Old Notes, (ii) to
extend the Exchange Offer, (iii) if any of
the conditions set forth under "The Exchange
Offer--Conditions of the Exchange Offer"
shall not have been satisfied, to terminate
the Exchange Offer, by giving oral or written
notice of such delay, extension or
termination to the Exchange Agent and (iv) to
waive any condition or otherwise amend the
terms of the Exchange Offer in any manner. If
the Exchange Offer is amended in a manner
determined by the Company to constitute a
material change, the Company will promptly
disclose such amendments by means of a
prospectus supplement that will be
distributed to the registered holders of the
Old Notes. See "The Exchange Offer--
Expiration Date; Extensions; Amendments" and
"The Exchange Offer--Conditions of the
Exchange Offer."
Accrued Interest on the Old Holders whose Old Notes are accepted for
Notes.......................... exchange will have the right to receive
interest accrued thereon from the date of
their original issuance or the last interest
payment date, as
5
<PAGE>
applicable, to, but not including, the date
of issuance of the New Notes, such interest
to be payable with the first interest payment
on the New Notes. Interest on the Old Notes
accepted for exchange will cease to accrue on
the day prior to the issuance of the New
Notes.
Procedures for Tendering Old
Notes;
Special Procedures for Except as otherwise provided below, each
Beneficial Owners.............. holder desiring to accept the Exchange Offer
must transmit a properly completed and duly
executed Letter of Transmittal, including all
other documents required by the Letter of
Transmittal, to the Exchange Agent (as
defined herein) at the address set forth in
"The Exchange Offer--The Exchange Agent;
Assistance" prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition,
either (i) certificates for such Old Notes
must be received by the Exchange Agent along
with the Letter of Transmittal, (ii) a timely
confirmation of book-entry transfer of such
Old Notes, if such procedure is available,
into the Exchange Agent's account at DTC
pursuant to the procedure for book-entry
transfer described below must be received by
the Exchange Agent prior to the Expiration
Date or (iii) the holder must comply with the
guaranteed delivery procedures described
below. Any beneficial owner of the Old Notes
(a "Beneficial Owner") whose Old Notes are
registered in the name of a nominee, such as
a broker, dealer, commercial bank or trust
company, and who wishes to tender Old Notes
in the Exchange Offer should instruct such
registered holder to promptly tender on such
Beneficial Owner's behalf. If such Beneficial
Owner wishes to tender on such Beneficial
Owner's own behalf, such beneficial owner
must, prior to completing and executing the
Letter of Transmittal and delivering the Old
Notes, make appropriate arrangements to
either register ownership of the Old Notes in
such Beneficial Owner's name or obtain a
properly completed bond power from the
registered holder. By executing the Letter of
Transmittal, each holder will represent to
the Company that, among other things, (i) the
holder is not an "affiliate" of the Company
as defined in Rule 405 of the Securities Act,
(ii) the holder is not a broker-dealer that
acquired Old Notes directly from the Company
in order to resell them pursuant to Rule 144A
of the Securities Act or any other available
exemption under the Securities Act, (iii) the
holder will acquire the New Notes in the
ordinary course of business and (iv) the
holder is not participating, and does not
intend to participate, and has no arrangement
or understanding with any person to
participate, in the distribution of the New
Notes. Any Old Notes not accepted for
exchange for any reason will be returned,
without expense to the tendering holder
thereof, as promptly as practicable after the
Expiration Date. See "The Exchange Offer--
Procedures for Tendering Old Notes."
6
<PAGE>
Guaranteed Delivery Procedures.. Holders of Old Notes who wish to tender their
Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot
deliver their Old Notes, the Letter of
Transmittal or any other documents required
by the Letter of Transmittal to the Exchange
Agent on or prior to the Expiration Date or
(iii) who cannot complete the procedures for
delivery by book-entry transfer on a timely
basis, may tender their Old Notes according
to the guaranteed delivery procedures set
forth in the Letter of Transmittal. See "The
Exchange Offer--Guaranteed Delivery
Procedures."
Acceptance of Old Notes and
Delivery of New Notes..........
Upon satisfaction or waiver of all conditions
of the Exchange Offer, the Company will
accept any and all Old Notes that are
properly tendered in the Exchange Offer prior
to 5:00 p.m., New York City time, on the
Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be
delivered promptly after acceptance of the
Old Notes. See "The Exchange Offer--
Acceptance of Old Notes for Exchange;
Delivery of New Notes."
Withdrawal Rights............... Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time,
on the Expiration Date. See "The Exchange
Offer--Withdrawal Rights."
The Exchange Agent.............. LaSalle National Bank is the exchange agent
(in such capacity, the "Exchange Agent"). The
address and telephone number of the Exchange
Agent are set forth in "The Exchange Offer--
The Exchange Agent; Assistance."
Fees and Expenses............... All expenses incident to the Company's
consummation of the Exchange Offer and
compliance with the Registration Rights
Agreement will be borne by the Company. The
Company will also pay certain transfer taxes,
if applicable, related to the Exchange Offer.
See "The Exchange Offer--Fees and Expenses."
Resales of New Notes............ The Company is making the Exchange Offer in
reliance on the position of the staff of the
Commission as set forth in certain
interpretive letters addressed to third
parties in other transactions. However, the
Company has not sought its own interpretive
letter and there can be no assurance that the
staff of the Commission would make a similar
determination with respect to the Exchange
Offer as it has in such interpretive letters
to third parties. Based on these
interpretations by the staff of the
Commission, the Company believes that New
Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a
holder (other than (i) a broker-dealer who
purchased Old Notes directly from the Company
for resale pursuant to Rule 144A or any other
available exemption under the Securities Act,
(ii) an "affiliate" of the Company within
7
<PAGE>
the meaning of Rule 405 under the Securities
Act or (iii) a broker-dealer who acquired the
Old Notes as a result of market-making or
other trading activities) without further
compliance with the registration and
prospectus delivery provisions of the
Securities Act; provided, that such holder is
acquiring the New Notes in the ordinary
course of business and is not participating,
and has no arrangement or understanding with
any person to participate, in a distribution
(within the meaning of the Securities Act) of
the New Notes. Holders wishing to accept the
Exchange Offer must represent to the Company,
as required by the Registration Rights
Agreement, that such conditions have been
met. Any holder of Old Notes who is not able
to rely on the interpretations of the staff
of the Commission set forth in the above-
mentioned interpretive letters must comply
with the registration and prospectus delivery
requirements of the Securities Act in
connection with any sale of such Old Notes,
unless such sale is made pursuant to an
exemption from such requirements. See "The
Exchange Offer--Resales of New Notes."
Federal Income Tax The issuance of the New Notes to holders
Consequences................... pursuant to the terms set forth in this
Prospectus will not constitute an exchange
for federal income tax purposes.
Consequently, no gain or loss will be
recognized by holders upon receipt of the New
Notes. See "Certain Federal Income Tax
Considerations."
Use of Proceeds................. There will be no proceeds to the Company from
the Exchange Offer. See "Use of Proceeds."
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to restrictions on
transfer of such Old Notes contained in the legend thereon. In general, the Old
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. See "Risk Factors--Restrictions on Resale" and "The Exchange Offer--
Consequences of Failure to Exchange."
8
<PAGE>
DESCRIPTION OF THE NEW NOTES
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that (i) the New Notes
have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof, (ii) holders of New Notes will not be
entitled to any Additional Interest pursuant to certain circumstances under the
terms of the Registration Rights Agreement and (iii) holders of New Notes will
not be entitled to certain other rights under the Registration Rights
Agreement. The New Notes will evidence the same debt as the Old Notes and will
be entitled to the benefits of the Indenture. See "The Exchange Offer--
Termination of Certain Rights," "The Exchange Offer--Procedures for Tendering
Old Notes" and "Description of the New Notes."
Notes Offered................... Up to $100,000,000 principal amount of the
Company's 10 1/4% Senior Subordinated Notes
due 2007, which have been registered under
the Securities Act.
Maturity Date................... November 1, 2007.
Interest........................ 10 1/4% calculated on the basis of a 360-day
year consisting of twelve 30-day months.
Interest Payment Dates.......... Interest on the New Notes will be payable
semi-annually in arrears on May 1 and Novem-
ber 1 of each year, commencing May 1, 1998.
Optional Redemption............. The New Notes will be redeemable at the
Company's option, in whole or in part, at any
time on or after November 1, 2002, at the re-
demption prices set forth herein, together
with accrued and unpaid interest, if any, to
the date of redemption. In addition, on or
prior to November 1, 2000, the Company may
redeem up to 35% of the Notes, at a price of
110.25% of the principal amount thereof, to-
gether with accrued and unpaid interest, if
any, to the redemption date, with the net
proceeds of an Equity Offering, provided,
that at least $65.0 million in principal
amount of Notes is outstanding immediately
after giving effect to such redemption. See
"Description of the New Notes--Optional Re-
demption."
Change of Control............... Following the occurrence of a Change of Con-
trol, the Company will be required to make an
offer to repurchase the New Notes at a price
equal to 101% of the principal amount there-
of, plus accrued and unpaid interest, if any,
to the date of purchase. See "Description of
the New Notes--Change of Control."
Ranking......................... The New Notes will represent unsecured senior
subordinated obligations of the Company and
will be subordinated in right of payment to
all existing and future Senior Indebtedness
of the Company. As of September 30, 1997, on
a pro forma basis after giving effect to the
Offering, the application of the net proceeds
therefrom and the DMC Acquisition, the Com-
pany would have had approximately $6.9 mil-
lion of Senior Indebtedness outstanding. In
addition, at September 30, 1997, on a
9
<PAGE>
pro forma basis after giving effect to the
Offering, the application of the net proceeds
therefrom and the DMC Acquisition, the
Company's subsidiaries would have had approx-
imately $6.0 million of indebtedness (includ-
ing trade payables) to which holders of the
New Notes would have been effectively subor-
dinated.
New Note Guarantee.............. The New Notes will be fully and
unconditionally guaranteed on an
unsecured senior subordinated basis by
DMC. See "Description of the New Notes--
Note Guarantees."
Certain Covenants............... The Indenture pursuant to which the New
Notes will be issued will contain certain
covenants including, among others,
covenants with respect to the following
matters: (i) limitation on indebtedness;
(ii) limitation on restricted payments;
(iii) limitation on certain transactions
with affiliates; (iv) disposition of
proceeds of asset sales; (v) limitations
on liens; (vi) limitation on other senior
subordinated indebtedness; (vii)
limitation of guarantees by restricted
subsidiaries; and (viii) limitation on
dividends and other payment restrictions
affecting restricted subsidiaries. See
"Description of the New Notes--Certain
Covenants."
Registration Rights............. In the event that applicable law or
Commission policy does not permit the
Company to effect the Exchange Offer, or
if certain holders of the Old Notes are
not permitted to participate in, or do
not receive the benefit of the Exchange
Offer, the Registration Rights Agreement
provides that the Company will use its
best efforts to cause to become effective
a shelf registration statement (the
"Shelf Registration Statement") with
respect to the resale of the Old Notes
and to keep such Shelf Registration
Statement effective until two years after
the Issue Date or such shorter period
ending when all the Old Notes have been
sold thereunder or cease to be
outstanding. The interest rate on the Old
Notes is subject to increase under
certain circumstances if the Company is
not in compliance with its obligations
under the Registration Rights Agreement.
See "Registration Rights."
RISK FACTORS
See "Risk Factors" on pages 13 through 19 for a discussion of certain factors
that should be considered by participants in the Exchange Offer.
10
<PAGE>
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The summary financial data should be read in conjunction with the Selected
Consolidated Financial Data, Pro Forma Financial Data, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and notes thereto contained elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30,
----------------------------------------- -------------------------------------- -------------
PRO FORMA PRO FORMA PRO FORMA
1994(1) 1995(1) 1996 1996(2) 1996 1997 1997(2) 1997(2)
-------- -------- -------- ----------- ----------- ----------- ----------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Net sales............... $130,852 $141,191 $178,537 $203,321 $137,479 $171,965 $188,290 $243,333
Cost of sales........... 106,037 115,004 135,696 155,427 104,489 129,967 142,874 184,728
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit............ 24,815 26,187 42,841 47,894 32,990 41,998 45,416 58,605
Selling, general and
administrative
expenses............... 19,497 22,176 28,787 32,125 21,417 25,461 27,712 36,595
-------- -------- -------- -------- -------- -------- -------- --------
Operating income........ 5,318 4,011 14,054 15,769 11,573 16,537 17,704 22,010
Interest expense........ (1,934) (2,894) (3,590) (10,959) (2,524) (3,712) (8,127) (10,854)
Write-off of affiliate
receivable(3).......... -- (3,423) -- -- -- -- -- --
Other income (expense),
net.................... 461 548 517 517 239 299 299 576
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations.. 3,845 (1,758) 10,981 5,327 9,288 13,124 9,876 11,732
Income (loss) from
discontinued
operations............. (554) 280 (482) (482) (482) -- -- --
Extraordinary gain
(loss) on
extinguishment of debt. (279) -- -- 1,875(4) -- -- -- --
Provision for income
taxes(5)............... -- -- -- 727 -- -- 521 1,169
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ 3,012 $ (1,478) $ 10,499 $ 5,993 $ 8,806 $ 13,124 $ 9,355 $ 10,563
======== ======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Depreciation and
amortization........... $ 2,679 $ 3,351 $ 3,073 $ 4,301 $ 2,319 $ 2,318 $ 3,264 $ 4,326
Capital expenditures.... $ 10,907 $ 5,816 $ 3,834 $ 4,186 $ 2,610 $ 4,105 $ 4,883 $ 6,207
EBITDA(6)............... $ 8,458 $ 7,910 $ 17,644 $ 20,587 $ 14,131 $ 19,154 $ 21,267 $ 26,912
EBITDA margin........... 6.5% 5.6% 9.9% 10.1% 10.3% 11.1% 11.3% 11.1%
EBITDA to interest...... 4.37 2.73 4.91 1.88 5.60 5.16 2.62 2.48
Total debt to EBITDA.... 3.61 4.29 2.72 -- -- -- -- 3.79
Earnings to fixed
charges................ 2.66x (7) 3.73x 1.47x 4.27x 4.19x 2.16x 2.03x
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1997
------------------------------------- -------------------------
PRO
1994 1995 1996 ACTUAL FORMA(2)
----------- ----------- ----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets....................................... $ 60,205 $ 66,421 $ 67,572 $ 96,104 $137,555
Working capital.................................... 3,984 8,085 15,252 33,855 55,803
Total debt......................................... 30,546 33,930 47,906 62,817 101,958
Total stockholders' equity (deficit)............... 14,365 12,887 (5,381)(8) 1,221 (3,831)
</TABLE>
- --------
(1) In December 1995, the Company signed an agreement to sell the working
capital and fixed assets of its Heritage Vinyl Division. In January 1996,
the sale was closed. The Company's 1994 financial statements were restated
to reflect this discontinued operation. See Note 3 to Consolidated
Financial Statements.
11
<PAGE>
(2) Pro Forma to give effect to the Offering, the application of the net
proceeds therefrom and the DMC Acquisition. See "Business--DMC
Acquisition," "Use of Proceeds" and "Capitalization."
(3) The write-off of the affiliate receivable resulted from a significant
customer, who is an affiliate of the Company, ceasing distribution
operations and selling its only division in December 1995. The write-off of
the affiliate receivable represents the portion of the remaining receivable
due that was not collectible. See Note 11 to Consolidated Financial
Statements.
(4) Adjusted to give effect to the Offering, the application of the net
proceeds therefrom and the DMC Acquisition, the Company would have reported
an extraordinary gain in connection with an early extinguishment of certain
former stockholders' notes.
(5) The Company currently operates as a Subchapter "S" corporation and,
accordingly, is not subject to federal income taxation for the periods for
which financial information has been presented herein.
(6) EBITDA represents income from continuing operations (excluding the write-
off of an affiliate receivable) plus interest expense (including
amortization of debt issuance costs), depreciation and amortization. EBITDA
is presented here to provide additional information about the Company's
ability to meet its future debt service, capital expenditure and working
capital requirements. EBITDA is not a measure of financial performance
under generally accepted accounting principles ("GAAP") and should not be
considered as an alternative either to net income as an indicator of the
Company's operating performance, or to cash flows as a measure of the
Company's liquidity.
(7) The ratio of earnings to fixed charges is expressed as the ratio of fixed
charges plus pretax earnings to fixed charges. Fixed charges include
interest on borrowings, amortization of deferred financing costs and the
interest portion of rent expense. Earnings were insufficient to cover fixed
charges for the year ended December 31, 1995 by $1.8 million.
(8) Total stockholders' deficit at December 31, 1996 resulted from a management
buyout of the Company's capital stock in June 1996. The Company purchased
its capital stock from selling shareholders using cash and notes. In order
to fund a portion of the cash payments made by the Company, the Company
obtained a $4.0 million term loan. See "Certain Relationships and Related
Transactions--Management Buyout" and Note 6 to Consolidated Financial
Statements.
12
<PAGE>
RISK FACTORS
Prospective investors should carefully consider, among other matters, the
following in connection with a decision to tender their Old Notes in the
Exchange Offer. The risk factors set forth below are generally applicable to
the Old Notes as well as the New Notes.
LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
The Company is highly leveraged. As of September 30, 1997, on a pro forma
basis after giving effect to the Offering, the application of the net proceeds
therefrom and the DMC Acquisition, the Company would have had approximately
$102.0 million (net of an unamortized discount of $769,000 on the Notes) of
indebtedness outstanding. Subject to certain restrictions, exceptions and
financial tests set forth in the Indenture and the New Credit Agreement (as
defined herein), the Company also may incur additional indebtedness in the
future. The degree to which the Company is leveraged could have important
consequences to the holders of the Notes, including, but not limited to, the
following: (i) a substantial portion of the Company's cash flow from
operations will be required to be dedicated to debt service and will not be
available to the Company for its operations; (ii) the Company's ability to
obtain additional financing in the future for acquisitions, capital
expenditures, working capital or general corporate purposes could be limited;
(iii) the Company will have increased vulnerability to adverse general
economic and industry conditions; and (iv) the Company may be vulnerable to
higher interest rates because borrowings under certain of its credit
arrangements are at variable rates of interest. The Company's ability to make
scheduled payments of principal of, to pay interest on or to refinance its
indebtedness (including the Notes) depends on its future performance and
financial results, which, to a certain extent, are subject to general
economic, financial, competitive, legislative, regulatory and other factors
beyond the Company's control. There can be no assurance that the Company's
business will generate sufficient cash flow from operations or that future
working capital borrowings will be available in an amount sufficient to enable
the Company to service its indebtedness, including the Notes, or make
necessary capital expenditures. See "Description of the New Credit Agreement"
and "Description of the New Notes."
SUBORDINATION
The payment of principal, premium, if any, and interest on the Notes will be
subordinated in right of payment to the prior payment in full of all existing
and future Senior Indebtedness of the Company, including indebtedness incurred
under the New Credit Agreement. As of September 30, 1997, on a pro forma basis
after giving effect to the Offering, the application of the net proceeds
therefrom and the DMC Acquisition, the Company would have had approximately
$6.9 million of Senior Indebtedness outstanding ($4.1 million of which was in
the form of performance bonds and guarantees) and the ability (subject to
certain conditions) to incur an additional $40.0 million of Senior
Indebtedness under the New Credit Agreement. The Notes also will be
effectively subordinated to all existing and future indebtedness of the
Company's subsidiaries. As of September 30, 1997, on a pro forma basis after
giving effect to the Offering, the application of the net proceeds therefrom
and the DMC Acquisition, the Company's subsidiaries would have had
approximately $6.0 million of indebtedness to which holders of the Notes would
have been effectively subordinated. Subject to certain restrictions,
exceptions and financial tests set forth in the Indenture and the New Credit
Agreement, the Company also may incur additional indebtedness in the future
that ranks prior to claims of holders of the Notes. See "Description of the
New Notes--Certain Covenants--Limitation on Indebtedness."
The subordination provisions of the Indenture will provide that, upon any
payment or distribution of the Company's assets to creditors upon any
dissolution, winding-up, insolvency, bankruptcy, receivership, liquidation,
reorganization or other proceedings relating to the Company, whether voluntary
or involuntary, holders of the Senior Indebtedness will be entitled to receive
payment in full of all amounts due thereon before the holders of Notes will be
entitled to receive any payment with respect to the Notes. In the event of any
default in the payment in respect of certain Senior Indebtedness, no payment
with respect to the Notes may be made by the Company unless and until such
default has been cured or waived. See "Description of the New Notes--
Subordination."
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The DMC Guarantee will be subordinated to all future guarantees by DMC of
Senior Indebtedness of the Company and any other Guarantor Senior Indebtedness
(as defined herein). As of September 30, 1997, DMC has $ million in
aggregate principal amount of Guarantor Senior Indebtedness outstanding, all
of which ranked senior in right of payment to the DMC Guarantee.
RESTRICTIONS IMPOSED BY INDEBTEDNESS
The New Credit Agreement and the Indenture contain covenants that, among
other things and subject to certain exceptions, restrict the ability of the
Company to incur additional indebtedness, pay dividends, prepay subordinated
indebtedness, dispose of certain assets, create liens and make certain
investments or acquisitions and otherwise restrict corporate activities. In
addition, under the New Credit Agreement, the Company is required to satisfy
specified financial covenants, including maintenance of a minimum EBITDA, a
fixed charge coverage ratio and ratio of total debt to EBITDA. The ability of
the Company to comply with such provisions may be affected by events beyond
the Company's control. The breach of any of these covenants could result in a
default under the New Credit Agreement. In the event of any such default,
depending on the actions taken by the lenders under the New Credit Agreement,
such lenders could elect to declare all amounts borrowed under the New Credit
Agreement, together with accrued interest, to be due and payable. A default
under the New Credit Agreement or the instruments governing the Company's
other indebtedness could constitute a cross-default under the Indenture and
any instruments governing the Company's other indebtedness, and a default
under the Indenture could constitute a cross-default under the New Credit
Agreement and any instruments governing the Company's other indebtedness. See
"Description of the New Credit Agreement" and "Description of the New Notes."
AGRICULTURAL INDUSTRY; SEASONALITY
The agricultural industry is cyclical and subject to fluctuation. The
Company's sales of grain storage bins and drying and handling equipment have
historically been affected by feed and grain prices, acreage planted, crop
yields, demand, government policies, government subsidies, levels of export
and other factors beyond the Company's control. Weather conditions also can
adversely impact the agricultural industry and delay planned construction
activity, resulting in fluctuating demand for the Company's grain equipment
and delayed or lost revenues. Increases in feed and grain prices have in the
past resulted in a decline in sales of feeding, watering and ventilation
systems, although these same conditions have tended to improve sales of grain
storage bins. The Company's sales of production equipment for swine and
poultry producers have been affected by the level of construction activity by
such producers, which is affected by feed prices and domestic and
international demand for pork and poultry. Future declines in grain prices may
result in decreased grain production and could have a material adverse effect
on sales of the Company's grain storage, drying and handling products.
Declines in domestic or international demand for swine or poultry could have a
material adverse effect on the Company's sales of swine or poultry production
equipment. In addition, general downturns in the farm sector could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Industry Overview."
Events beyond the control of the Company, such as an outbreak of disease in
swine or poultry, may result in decreased production of swine and poultry in
local markets or generally. For example, a recent outbreak of hog cholera has
resulted in the destruction or scheduled destruction of approximately half of
the swine population in The Netherlands and in Taiwan in an effort to contain
the spread of the disease. Moreover, Belgium and Spain have ordered the
selective destruction of swine for the same purpose. The public perception of
health risks (such as salmonella food poisoning) associated with poultry and
swine products may result in reduced consumption of these products. Crop
diseases could affect grain production in local markets or generally. Any of
these events could have a material adverse effect on the Company's business,
financial condition and results of operations.
Sales of agricultural equipment are seasonal, with farmers traditionally
purchasing grain storage bins in the summer and fall in conjunction with the
harvesting season, and swine and poultry producers purchasing equipment during
prime construction periods in the spring, summer and fall. The Company's net
sales and net
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income have historically been lower during the first and fourth fiscal
quarters as compared to the second and third quarters. In 1996, the Company
generated approximately 26% and 36% of its net sales and 32% and 52% of its
operating income in the second and third fiscal quarters, respectively.
Consequently, results for the nine months ended September 30, 1997 are not
necessarily indicative of results to be expected for the full year. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
COMPETITION
The market for the Company's products is competitive. Domestically and
internationally, the Company competes with a variety of manufacturers and
suppliers that offer a limited number of the products offered by the Company.
The Company believes that only one of its competitors, CTB International
Corp., offers products across most of the Company's product lines. Recent
trends towards consolidation in the agricultural industry have intensified
competition. Competition is based on the price, value, reputation, quality and
design of the products offered and the customer service provided by
manufacturers and dealers of the products. Although the Company believes that
it is competitive in all of these categories, there can be no assurance that
the Company will remain competitive in general or in any particular area of
its business. To the extent that the Company's competitors provide more
innovative and/or higher quality products, better designed products, better
pricing or offer better customer service through their distributors and
dealers, the Company's ability to compete could be adversely affected, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. Independent dealers who market, sell and
install the Company's products may also market, sell and install competing
product lines. There can be no assurance that dealers will continue to handle,
or actively market, the Company's products. See "Business--Competition."
CONTROL BY PRINCIPAL STOCKHOLDERS; POTENTIAL CONFLICTS OF INTEREST
The Company's senior management team owns all of the outstanding voting
stock of the Company. See "Ownership of Capital Stock." In addition, these
individuals are parties to a voting agreement that requires a majority vote by
the holders of the Company's voting stock to approve certain matters affecting
the Company. See "Certain Relationships and Related Transactions--Management
Buyout--Stockholder Agreements." As a result, these individuals have the
ability to control all fundamental matters affecting the Company, including
the merger of the Company, the sale of all or substantially all of the
Company's assets and the future issuance of any securities of the Company.
Certain decisions concerning the operations or financial structure of the
Company may present conflicts of interest between the Company's stockholders
and the holders of the Notes. For example, if the Company encounters financial
difficulties or is unable to pay its debts as they become due, the interests
of the Company's stockholders might conflict with those of the holders of the
Notes. The Company's stockholders also may have an interest in pursuing
acquisitions, divestitures, financings or other transactions that could
enhance their equity investment, even though such transactions might involve
risk to the holders of the Notes. Because the Company's senior management team
is able to control the management policy of the Company, any such conflict of
interest may be resolved in favor of the Company's stockholders to the
detriment of the holders of the Notes.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon a number of key executive officers,
particularly Craig Sloan, Chief Executive Officer, Jorge Andrade, President
and Chief Operating Officer, and John W. Funk, Chief Financial Officer,
Secretary, Treasurer and General Counsel, as well as the Presidents of certain
of the Company's divisions. See "Management--Executive Officers and
Directors." The Company has entered into employment agreements with Messrs.
Sloan, Andrade and Funk each of whom are covered by key-man life insurance
policies, the proceeds of which may be used to repurchase their shares of the
Company's capital stock under certain circumstances. See "Management--
Employment Agreements" and "Certain Relationships and Related Transactions--
Management Buyout--Stockholder Agreements." There can be no assurance that the
Company
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will be able to retain its key executive officers or that it will be able to
attract or retain other skilled management personnel in the future. The loss
of the services of any of the Company's key personnel, or the inability to
attract and retain additional qualified personnel, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
RAW MATERIALS PRICE VOLATILITY
The principal raw materials used by the Company in the manufacture of its
products, including steel, can be subject to significant price fluctuations.
The Company has no long-term supply contracts for such raw materials. While
the selling prices of the Company's products tend to increase or decrease over
time with the cost of raw materials, such changes may not occur simultaneously
or to the same degree. There can be no assurance that the Company will be able
to pass any increases in raw material costs through to its customers in the
form of price increases. Significant increases in the price of raw materials,
if not offset by product price increases, could have a material adverse effect
on the Company's profitability. See "Business--Raw Materials."
RISKS ASSOCIATED WITH ACQUISITIONS
As part of its business strategy, the Company plans to make strategic
acquisitions. In pursuing this acquisition strategy, the Company faces risks
commonly encountered with growth through acquisitions. These risks include
incurring significantly higher than anticipated capital expenditures and
operating expenses, failing to assimilate the operations and personnel of
acquired businesses, losing customers, entering markets in which the Company
has no or limited experience, disrupting the Company's ongoing business and
dissipating the Company's management resources. Realization of the anticipated
benefits of a strategic acquisition may take several years or may not occur at
all. There can be no assurance that the Company will be successful in
overcoming these risks or any other problems encountered with acquisitions. To
the extent that the Company does not successfully avoid or overcome these
risks or problems related to acquisitions, the Company's business, financial
condition and results of operations could be adversely affected. Future
acquisitions also may have a significant impact on the Company's financial
position and results of operations, and could cause substantial fluctuations
in the Company's quarterly and yearly results of operations. Although the
Company will continue to evaluate potential acquisitions, there can be no
assurances that the Company will be successful in effecting any acquisitions
in the future. See "Business--Business Strategy" and "Business--DMC
Acquisition."
INTERNATIONAL OPERATIONS; EXPOSURE TO FOREIGN CURRENCY RISK
As part of its business strategy, the Company plans to pursue international
opportunities for growth. International operations generally are subject to
various risks that are not present in domestic operations, including
restrictions on dividends, restrictions on repatriation of funds, unexpected
changes in tariffs and other trade barriers, difficulties in staffing and
managing foreign operations, political instability, fluctuations in currency
exchange rates, reduced protection for intellectual property rights in some
countries, seasonal reductions in business activity and potentially adverse
tax consequences, any of which could adversely impact the Company's
international operations. As the Company expands its operations
internationally, its exposure to such foreign risks will be amplified. There
can be no assurance that one or more of the above-mentioned risks will not
have a material adverse effect on the Company's future international
operations and, consequently, on the Company's business, financial condition
and results of operations. See "Business--Business Strategy" and "Business--
Product Distribution."
The Company currently manufactures or purchases substantially all of its
products in the U.S. and derived approximately 31% of its net sales in 1996
from foreign countries. The production costs, profit margins and competitive
position of the Company are affected by the strength of the U.S. dollar
relative to the strength of the currencies in countries where its products are
sold. The Company's results of operations and financial condition may be
adversely affected by fluctuations in foreign currencies because, for example,
such fluctuations may negatively impact the purchasing power of the Company's
foreign customers and make the Company's products
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<PAGE>
less competitive compared to locally-produced products. In addition, the
Company's results of operations and financial condition may also be negatively
impacted by translations of the financial statements of the Company's foreign
subsidiaries from local currencies into U.S. dollars.
The Company enters into foreign currency forward exchange contracts on a
limited basis. Such contracts generally are entered into with respect to
significant outstanding accounts receivable denominated in foreign currencies
for which timing of the receipt of payment can be reasonably estimated. Such
hedging activities are intended to reduce the risk that eventual net dollar
inflows resulting from the sale of products to foreign customers will be
adversely affected by changes in foreign currency exchange rates. Although the
Company seeks to enter into foreign exchange contracts which generally offset
gains and losses on the assets and liabilities being hedged, no assurances can
be given that such hedging activities will not result in losses which will
have an adverse effect on the Company's financial condition or results of
operations.
GOVERNMENT REGULATION AND POLICY
Domestic and foreign political developments and government regulations and
policies, including, without limitation, import/export quotas, government
subsidies and reserve programs, directly affect the agricultural industry in
the United States and abroad and thereby indirectly affect the Company's
business. Foreign trade embargoes and import quotas have in the past reduced
U.S. exports of grain, swine and poultry, adversely affecting the Company's
sales. The application or modification of existing laws, regulations or
policies or the adoption of new laws, regulations or policies could have an
adverse effect on the Company's business.
REGULATORY AND ENVIRONMENTAL MATTERS
Like other manufacturers, the Company is subject to a broad range of
federal, state, local and foreign laws and requirements, including those
governing discharges to the air and water, the handling and disposal of solid
and hazardous substances and wastes, the remediation of contamination
associated with releases of hazardous substances at the Company's facilities
and offsite disposal locations, workplace safety and equal employment
opportunities. Expenditures made by the Company to comply with such laws and
requirements historically have not been material.
Governmental authorities have the power to enforce compliance with such laws
and regulations and violators may be subject to penalties, injunctions or
both. Third parties may also have the right to enforce compliance with such
laws and regulations. Like most other industrial concerns, the Company's
manufacturing operations entail some risk of future noncompliance with
environmental regulations and there can be no assurance that material costs or
liabilities will not be incurred by the Company as a result thereof. It is
also possible that other developments, such as additional or increasingly
strict requirements of laws and regulations of these types and enforcement
policies thereunder, could significantly increase the Company's costs of
operations. See "Business--Regulatory and Environmental Matters."
PRODUCT LIABILITY RISK
Products sold by the Company may expose it to potential liabilities for
personal injury or property damage claims relating to the use of such
products. Although product liability claims historically have not had a
material adverse effect upon the Company, there can be no assurance that the
Company will not be subject to or incur liability for such claims in the
future. While the Company maintains third-party product liability insurance
that it believes to be adequate, there can be no assurance that the Company
will not experience claims in excess of its insurance coverage, or claims that
ultimately are not covered by insurance. There can also be no assurance that
such insurance will continue to be available on economically reasonable terms.
A significant claim that is uninsured or partially insured could result in
loss or deferral of revenues, diversion of resources or damage to the
Company's reputation, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Product Liability and Legal Proceedings."
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FRAUDULENT CONVEYANCE
The Company believes that the indebtedness represented by the Notes, and DMC
believes the indebtedness represented by the Guarantee, are being incurred for
proper purposes and in good faith, and that, based on present forecasts, asset
valuations and other financial information, the Company and DMC are solvent,
will have sufficient capital for carrying on their businesses and will be able
to pay their debts as they mature. Notwithstanding these beliefs, however,
under federal or state fraudulent transfer laws, if a court of competent
jurisdiction in a suit by an unpaid creditor or a representative of creditors
(such as a trustee in bankruptcy or a debtor-in-possession) were to find that
the Company or DMC did not receive fair consideration (or reasonably
equivalent value) for incurring the Notes or the Guarantee, as the case may
be, and at the time of the incurrence of such indebtedness, the Company or DMC
were insolvent, were rendered insolvent by reason of such incurrence, were
engaged in a business or transaction for which their remaining assets
constituted unreasonably small capital, intended to incur, or believed that
they would incur, debts beyond their ability to pay such debts as they
matured, or that the Company or DMC intended to hinder, delay or defraud their
creditors, then such court could, among other things, (i) void all or a
portion of the Company's obligations to the holders of the Notes or DMC's
obligations under the Guarantee, the effect of which would be that the holders
of the Notes may not be repaid in full, (ii) recover all or a portion of the
payments made to holders of the Notes and/or (iii) subordinate the Company's
or DMC's obligations to the holders of the Notes to other existing and future
indebtedness of the Company or DMC, as the case may be, to a greater extent
than would otherwise be the case, the effect of which would be to entitle such
other creditors to be paid in full before any payment could be made on the
Notes. The measure of insolvency for purposes of the foregoing will vary
depending upon the law of the relevant jurisdiction. Generally, however, a
company would be considered insolvent for purposes of the foregoing if the sum
of the company's debts is greater than all of the company's property at a fair
valuation, or if the present fair saleable value of the company's assets is
less than the amount that will be required to pay its probable liability on
its existing debts as they become absolute and mature. There can be no
assurances as to what standards a court would apply to determine whether the
Company or DMC were solvent at the relevant time, or whether, whatever
standard was applied, the Notes or the Guarantee would not be voided on
another of the grounds set forth above.
ABSENCE OF PRIOR PUBLIC MARKET FOR NEW NOTES
The New Notes will constitute a new class of securities with no established
trading market. Although the New Notes will generally be permitted to be
resold or otherwise transferred by nonaffiliates of the Company without
compliance with the registration requirements under the Securities Act, the
Company does not intend to apply for a listing of the New Notes on any
securities exchange or to arrange for the New Notes to be quoted on the NASDAQ
National Market or other quotation system. Merrill Lynch has advised the
Company that it currently intends to make a market in the New Notes; however,
Merrill Lynch is not obligated to do so, and any market-making with respect to
the New Notes may be discontinued at any time without notice. As a result,
there can be no assurance that an active trading market for the New Notes will
develop. If a market were to develop, the New Notes could trade at prices that
may be lower than the initial market values thereof depending on many factors,
including prevailing interest rates and the markets for similar securities.
RESTRICTIONS ON RESALE
The Old Notes were offered and sold by the Company in a private offering
exempt from registration pursuant to the Securities Act and have been resold
pursuant to Rule 144A, Regulation S and certain other available exemptions
under the Securities Act. As a result, the Old Notes may not be reoffered or
resold by purchasers, except pursuant to an effective registration statement
under the Securities Act, or pursuant to an applicable exemption from such
registration.
Based on interpretations by the staff of the Commission, the Company
believes that each holder (other than (i) a broker-dealer who purchased Old
Notes directly from the Company for resale pursuant to Rule 144A of the
Securities Act or any other available exemption under the Securities Act, (ii)
an "affiliate" of the Company
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<PAGE>
within the meaning of Rule 405 under the Securities Act or (iii) a broker-
dealer who acquired the Old Notes as a result of market-making or other
trading activities) who duly exchanges Old Notes for New Notes in the Exchange
Offer will receive notes that are freely transferable under the Securities
Act, provided, that such New Notes are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any other person to participate, in a
distribution (within the meaning of the Securities Act) of the New Notes. The
Company has not, however, sought its own no-action letter from the staff of
the Commission regarding resales of the New Notes and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the resale of the New Notes. Any holder of Old Notes who is
not able to rely upon such staff interpretations must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale of such Old Notes, unless such sale is made pursuant
to an exemption from such requirements. See "Prospectus Summary--The Exchange
Offer."
CERTAIN MARKET CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
To the extent that Old Notes are tendered and accepted for exchange pursuant
to the Exchange Offer, the trading market for Old Notes that remain
outstanding may be significantly more limited, which might adversely affect
the liquidity of the Old Notes not tendered for exchange. The extent of the
market therefor and the availability of price quotations would depend upon a
number of factors, including the number of holders of Old Notes remaining at
such time and the interest in maintaining a market in such Old Notes on the
part of securities firms. An issue of securities with a smaller outstanding
market value available for trading (the "float") may command a lower price
than would a comparable issue of securities with a greater float. As a result,
the market price for Old Notes that are not exchanged in the Exchange Offer
may be affected adversely to the extent that the amount of Old Notes exchanged
pursuant to the Exchange Offer reduces the float. The reduced float also may
make the trading price of the Old Notes that are not exchanged more volatile.
In addition, holders of Old Notes who do not exchange their Old Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to
restrictions on transfer of such Old Notes contained in the legend thereon. In
general, the Old Notes may be offered or sold unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register the Old Notes
under the Securities Act. See "Risk Factors--Restrictions on Resale" and "The
Exchange Offer--Consequences of Failure to Exchange."
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THE EXCHANGE OFFER
The following discussion set forth or summarizes what the Company believes
are the material terms of the Exchange Offer. This Summary is qualified in its
entirety by reference to the full text of the documents underlying the
Exchange Offer, copies of which are filed as exhibits to the Registration
Statement of which this Prospectus is a part, and are incorporated by
reference herein.
PURPOSE AND EFFECT
The Old Notes were sold by the Company to the Initial Purchasers on November
5, 1997 pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes in reliance on Rule 144A and Regulation S.
The Company, DMC and the Initial Purchasers also entered into the Registration
Rights Agreement, pursuant to which the Company agreed to use its best efforts
(i) to file an exchange offer registration statement ("Exchange Offer
Registration Statement") with the Commission under the Securities Act
concerning the Exchange Offer within 90 days after the Issue Date, (ii) to
cause the Exchange Offer Registration Statement to be declared effective by
the Commission within 150 days after the Issue Date, (iii) to keep the
Exchange Offer Registration Statement effective until the closing of the
Exchange Offer and (iv) to cause the Exchange Offer to be consummated 180 days
after the Issue Date. Pursuant to such Registration Rights Agreement, the
Company will endeavor to, within the applicable time periods, register under
the Securities Act all of the New Notes pursuant to a registration statement
under which the Company will offer each holder of Old Notes the opportunity to
exchange any and all of the outstanding Old Notes held by such holder for New
Notes in an aggregate principal amount equal to the aggregate principal amount
of Old Notes tendered for exchange by such holder. Subject to limited
exceptions, the Exchange Offer being made hereby, if commenced and consummated
within such applicable time periods, will satisfy those requirements under the
Registration Rights Agreement. In such event, Old Notes not exchanged for New
Notes in the Exchange Offer would remain outstanding and would continue to
accrue interest, but would generally not retain any rights under the
Registration Rights Agreement. Holders of Old Notes seeking liquidity in their
investment would have to rely on an exemption to the registration requirements
under the securities laws, including the Securities Act. This Exchange Offer
is intended to satisfy the Company's exchange offer obligations under the
Registration Rights Agreement.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal, to exchange $1,000
in principal amount of the New Notes for each $1,000 in principal amount of
the outstanding Old Notes. The Company will accept for exchange any and all
Old Notes that are validly tendered on or prior to 5:00 p.m., New York City
time, on the Expiration Date. Tenders of the Old Notes may be withdrawn in
accordance with the procedures described under "--Withdrawal Rights" at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. The
Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange. However, the Exchange Offer is subject to
certain customary conditions that may be waived by the Company, and to the
terms and provisions of the Registration Rights Agreement. See "--Conditions
of the Exchange Offer."
Old Notes may be tendered only in multiples of $1,000. Subject to the
foregoing, holders may tender less than the aggregate principal amount
represented by the Old Notes held by them, provided that they appropriately
indicate this fact on the Letter Of Transmittal accompanying the tendered Old
Notes (or so indicate pursuant to the procedures for book-entry transfer).
As of the date of this Prospectus, $100 million in aggregate principal
amount of the Old Notes is outstanding, the maximum amount authorized by the
Indenture for all Notes. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1998, to all holders of
Old Notes known to the Company.
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Because the Exchange Offer is for any and all Old Notes, the number of Old
Notes tendered and exchanged in the Exchange Offer will reduce the principal
amount of Old Notes outstanding. Following the consummation of the Exchange
Offer, holders who did not tender their Old Notes generally will not have any
further registration rights under the Registration Rights Agreement, and such
Old Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected. The Old Notes are currently eligible for sale pursuant to Rule 144A
through the Private Offering, Resales and Trading through Automated Linkages
("PORTAL") system. Because the Company anticipates that most holders of Old
Notes will elect to exchange such Old Notes for New Notes due to the absence
of restrictions on the resale of New Notes under the Securities Act, the
Company anticipates that the liquidity of the market for any Old Notes
remaining after the consummation of the Exchange Offer may be substantially
limited. See "Risk Factors--Certain Market Consequences of Failure to Exchange
Old Notes."
The form and terms of the New Notes are generally the same as the form and
terms of the Old Notes, except that (i) the New Notes have been registered
under the Securities Act and will not bear legends restricting the transfer
thereof, (ii) the holders of New Notes will not be entitled to any Additional
Interest under the terms of the Registration Rights Agreement and (iii)
holders of New Notes will not be entitled to certain other rights under the
Registration Rights Agreement. The New Notes will evidence the same debt as
the Old Notes and will be entitled to the benefits of the Indenture.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Notes and for the purposes of receiving the New Notes from the Company
and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "--Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE
OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO
TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE PRINCIPAL
AMOUNT OF OLD NOTES TO TENDER, AFTER READING CAREFULLY THIS PROSPECTUS AND THE
LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON
THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Exchange Offer shall remain open for a period of not less than 30 days
after notice is mailed to holders. The Expiration Date shall be , 1998 at
5:00 p.m., New York City time, unless the Company, in its sole discretion,
extends the Exchange Offer, in which case the Expiration Date shall be the
latest date and time to which the Exchange Offer is extended.
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In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, by means of a press release or any other acceptable
means, each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
The Company expressly reserves the right, in its sole and absolute
discretion, (i) to delay accepting any Old Notes, (ii) to extend the Exchange
Offer, (iii) if any of the conditions set forth below under "Conditions of the
Exchange Offer" shall not have been satisfied, to terminate the Exchange
Offer, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent and (iv) to waive any condition or otherwise
amend the terms of the Exchange Offer in any manner. If such waiver or
amendment constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver or amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Old
Notes, and the Company will extend the Exchange Offer to the extent required
by Rule l4e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such announcement in the case of
an extension will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Company may choose to make any public
announcement and subject to applicable law, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to the Dow Jones News Service.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to accept for
exchange, or to exchange, any Old Notes for any New Notes, and, as described
below, may terminate the Exchange Offer (whether or not any Old Notes have
theretofore been accepted for exchange) or may waive any conditions to or
amend the Exchange Offer, if any of the following conditions have occurred or
exists or have not been satisfied:
(i) the due tendering of Old Notes in accordance with the Exchange Offer;
(ii) the Exchange Offer, or the making of any exchange by a holder,
violates any applicable law, statute, rule, regulation or any applicable
interpretation of the staff of the Commission;
(iii) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company;
(iv) each holder of Old Notes exchanged in the Exchange Offer shall have
made certain customary representations, including representations that,
among other things, (i) the holder is not an "affiliate" of the Company as
defined in Rule 405 of the Securities Act, (ii) the holder is not a broker-
dealer that acquired Old Notes directly from the Company in order to resell
them pursuant to Rule 144A of the Securities Act or any other available
exemption under the Securities Act, (iii) the holder will acquire the New
Notes in the ordinary course of business and (iv) that the holder is not
participating, and does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of the
New Notes;
(v) all governmental approvals have been obtained, which such approval
the Company shall, in its reasonable judgment, deem necessary for the
consummation of the Exchange Offer as contemplated hereby;
(vi) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (a) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or
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assessing or seeking any damages as a result thereof or (b) resulting in a
material delay in the ability of the Company to accept for exchange or
exchange some or all of the Old Notes pursuant to the Exchange Offer;
(vii) there shall have occurred (a) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (b) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer, (c) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States or any limitation by
any governmental agency or authority which adversely affects the extension
of credit or (d) a commencement of a war, armed hostilities or other
similar international calamity directly or indirectly involving the United
States, or, in the case of any of the foregoing existing at the time of the
commencement of the Exchange Offer, a material acceleration or worsening
thereof; or
(viii) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
sole judgment of the Company, is or may be adverse to the Company, or the
Company shall have become aware of facts that, in the sole judgment of the
Company, have or may have an adverse effect on the value of the Old Notes
or the New Notes.
If the Company determines in its sole and absolute discretion that any of
the foregoing events or conditions has occurred or exists or has not been
satisfied, the Company may, subject to applicable law, (i) terminate the
Exchange Offer (whether or not any Old Notes have theretofore been accepted
for exchange), (ii) extend the Exchange Offer and retain all Old Notes
tendered prior to the expiration of the Exchange Offer subject, however, to
the rights of holders to withdraw such Old Notes or (iii) waive any such
condition or otherwise amend the terms of the Exchange Offer in any respect.
If such waiver or amendment constitutes a material change to the Exchange
Offer, the Company will promptly disclose such waiver or amendment by means of
a prospectus supplement that will be distributed to the registered holders of
the Old Notes, and the Company will extend the Exchange Offer to the extent
required by Rule l4e-1 under the Exchange Act.
The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company in whole or in part at any time and from time to time in
its sole discretion. The failure by the Company at any time to exercise any of
the foregoing rights shall not be deemed a waiver of such rights and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. Any determination by the Company concerning the events
described above will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a part or
the qualification of the Indenture under the Trust Indenture Act of 1939.
TERMINATION OF CERTAIN RIGHTS
Holders of New Notes will not be and, upon consummation of the Exchange
Offer, holders of Old Notes who were permitted to participate in the Exchange
Offer will no longer be, entitled to (i) the right to receive Additional
Interest under the Registration Rights Agreement or (ii) certain other rights
under the Registration Rights Agreement intended for the holders of
unregistered securities; provided, that holders of Old Notes who are not
permitted to participate in the Exchange Offer or who do not receive fully
tradeable New Notes pursuant to the Exchange Offer, shall have the right to
require the Company to file a Shelf Registration Statement solely for the
benefit of such holders of Old Notes and will be entitled to receive
Additional Interest following the occurrence of a Registration Default in
connection with the filing of such Shelf Registration Statement. See
"Registration Rights." Notwithstanding anything to the contrary in the
foregoing, Old Notes not tendered in the Exchange Offer will remain
outstanding and continue to accrue interest in accordance with their terms.
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ACCRUED INTEREST ON THE OLD NOTES
Holders whose Old Notes are accepted for exchange will have the right to
receive interest accrued thereon from the date of their original issuance or
the last interest payment date, as applicable, to, but not including, the date
of issuance of the New Notes, such interest to be payable with the first
interest payment on the New Notes. Interest on the Old Notes accepted for
exchange, which interest accrued at the rate of 10 1/4% per annum, will cease
to accrue on the day prior to the issuance of the New Notes.
PROCEDURES FOR TENDERING OLD NOTES
The tender of a holder's Old Notes as set forth below and the acceptance
thereof by the Company will constitute a binding agreement between the
tendering holder and the Company upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal.
Except as set forth below, a holder who wishes to tender Old Notes for
exchange pursuant to the Exchange Offer must transmit a properly completed and
duly executed Letter of Transmittal, including all other documents required by
such Letter of Transmittal, to the Exchange Agent at the address set forth
under "--The Exchange Agent; Assistance" prior to 5:00 p.m., New York City
time on the Expiration Date. In addition, either (i) certificates of such Old
Notes must be received by the Exchange Agent along with the Letter of
Transmittal, (ii) a timely confirmation of book-entry transfer of such Old
Notes, if such procedure is available, into the Exchange Agent's account at
DTC pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the
holder must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
ELIGIBLE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE ELIGIBLE HOLDER USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTER OF TRANSMITTAL OR OLD NOTES
SHOULD BE SENT TO THE COMPANY OR DTC. HOLDERS MAY REQUEST THEIR RESPECTIVE
BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT SUCH
TENDER FOR SUCH HOLDER.
Any Beneficial Owner whose Old Notes are registered in the name of a
nominee, such as a broker, dealer, commercial bank or trust company, and who
wishes to tender Old Notes in the Exchange Offer should contact such
registered holder promptly and instruct such registered holder to tender on
such Beneficial Owner's behalf. If such Beneficial Owner wishes to tender
directly, such Beneficial Owner must, prior to completing and executing the
Letter of Transmittal and tendering Old Notes, either make appropriate
arrangements to register ownership of the Old Notes in such Beneficial Owner's
name or obtain a properly completed bond power from the registered holder.
Beneficial Owners should be aware that the transfer of registered ownership
may take considerable time.
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at DTC for the purposes of the Exchange Offer within two
business days after the date of this Prospectus. Any financial institution
that is a participant in DTC's Book-Entry Transfer Facility system may make
book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes
into the Exchange Agent's account in accordance with DTC's procedures for such
transfer. However, although delivery of the Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other required documents, must in
any case, be delivered to and received by the Exchange Agent at its address
set forth under "--The Exchange Agent; Assistance" on or prior to the
Expiration Date, or the guaranteed delivery procedure set forth
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<PAGE>
below must be complied with, within the time period provided under such
procedures. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Old Notes surrendered for exchange pursuant hereto are tendered (i)
by a registered holder of the Old Notes who has not completed either the box
entitled "Special Exchange Instructions" or the box entitled "Special Delivery
Instructions" in the Letter of Transmittal or (ii) for the account of an
Eligible Institution. In the event that a signature on a Letter of Transmittal
or a notice of withdrawal, as the case may be, is required to be guaranteed,
such signature must be guaranteed by an Eligible Institution. If the Letter of
Transmittal is signed by a person other than the registered holder of the Old
Notes, the Old Notes surrendered for exchange must be endorsed or accompanied
by appropriate bond powers and a proxy which authorizes such person to tender
the Old Notes on behalf of the registered holder, in each case, signed by the
registered holder, with the signature thereon guaranteed by an Eligible
Institution. The term "registered holder" as used herein with respect to the
Old Notes means any person in whose name the Old Notes are registered on the
books of the Registrar. The term "Eligible Institution" as used herein means a
firm which is a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or any other
"eligible guarantor institution" as such term is defined in Rule 17Ad-15 under
the Exchange Act.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and
all Old Notes not properly tendered and to reject any Old Notes the Company's
acceptance of which might, in the judgment of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to particular Old Notes
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Old Notes for exchange must be
cured within such period of time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to
give notification of defects or irregularities with respect to tenders of Old
Notes, nor shall any of them incur any liability for failure to give
notification of defects or irregularities with respect to tenders of Old
Notes. Tenders of the Old Notes will not be deemed to have been made until
such irregularities have been cured or waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company, in its sole discretion,
of such person's authority so to act must be submitted with the Letter of
Transmittal.
By tendering, each registered holder will represent to the Company, among
other things, that: (i) the holder is not an "affiliate" of the Company as
defined in Rule 405 of the Securities Act, (ii) the holder is not a broker-
dealer that acquired Old Notes directly from the Company in order to resell
them pursuant to Rule 144A of the Securities Act or any other available
exemption under the Securities Act, (iii) the holder will acquire the New
Notes in the ordinary course of business and (iv) the holder is not
participating, and does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes. Any holder of Old Notes that is unable to make these representations to
the Company will not be able to rely on the interpretations of the staff of
the Commission described in "--Resales of New Notes" and therefore will be
required to comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale of such Old Notes, unless
such sale is made pursuant to an exemption from such requirements.
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<PAGE>
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other documents required by the Letter of Transmittal to
the Exchange Agent on or prior to the Expiration Date or (iii) who cannot
complete the procedure for book-entry transfer on a timely basis, may tender
their Old Notes according to the guaranteed delivery procedures set forth in
the Letter of Transmittal. Pursuant to such procedures: (i) such tender must
be made by or through an Eligible Institution, (ii) prior to the Expiration
Date, the Exchange Agent must have received from the holder and the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder, the certificate or registration number or
numbers of the tendered Old Notes, and the principal amount of tendered Old
Notes, stating that the tender is being made thereby and guaranteeing that, at
least within four (4) New York Stock Exchange trading days after the
Expiration Date, the tendered Old Notes, a duly executed Letter of Transmittal
(or a facsimile thereof) and any other required documents will be deposited by
the Eligible Institution with the Exchange Agent and (iii) such properly
completed and executed documents required by the Letter of Transmittal (or a
facsimile thereof) and the tendered Old Notes in proper form for transfer (or
confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC) must be received by the Exchange Agent within at least
four (4) New York Stock Exchange trading days after the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all the conditions to the Exchange Offer, the
Company will accept any and all Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange Offer will be delivered as
promptly as practicable after acceptance of the Old Notes. For purposes of the
Exchange Offer, the Company shall be deemed to have accepted validly tendered
Old Notes, when, as, and if the Company has given oral or written notice
thereof to the Exchange Agent.
In all cases, issuances of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and all other required
documents (or of confirmation of a book-entry transfer of such Old Notes into
the Exchange Agent's account at DTC); provided, that the Company reserves the
absolute right to waive any defects or irregularities in the tender or
conditions of the Exchange Offer. If any tendered Old Notes are not accepted
for any reason, such unaccepted Old Notes will be returned without expense to
the tendering holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of the Old Notes may be withdrawn by delivery of a written or
facsimile transmission notice to the Exchange Agent, at its address set forth
herein, at any time prior to 5:00 p.m., New York City time, on the Expiration
Date after which tenders of Old Notes are irrevocable. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate or registration number or numbers and
principal amount of such Old Notes, as applicable or, in the case of notes
transferred by book-entry transfer, the name and number of the account at DTC
to be credited), (iii) be signed by the Depositor in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by a
bond power in the name of the person withdrawing the tender, in satisfactory
form as determined by the Company in its sole discretion, duly executed by the
registered holder, with the signature thereon guaranteed by an Eligible
Institution together with the other documents required upon transfer by the
Indenture, (iv) specify the name in which such Old Notes are to be re-
registered, if different from the Depositor,
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<PAGE>
pursuant to such documents of transfer and (v) include a statement that such
holder is withdrawing its election to have such Old Notes exchanged. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, in its sole discretion. The
Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer and no New Notes will be issued
with respect thereto unless the Old Notes so withdrawn are validly retendered.
Any Old Notes which have been tendered for exchange but which are withdrawn
will be returned to the holder thereof without cost to such holder as promptly
as practicable after withdrawal. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "--Procedures
for Tendering Old Notes" at any time on or prior to the Expiration Date.
THE EXCHANGE AGENT; ASSISTANCE
LaSalle National Bank has been appointed the Exchange Agent for the Exchange
Offer. All tendered Old Notes, executed Letters of Transmittal and other
related documents should be directed to the Exchange Agent. Questions and
requests for assistance and requests for additional copies of the Prospectus,
the Letter of Transmittal and other related documents should be addressed to
the Exchange Agent as follows:
By Hand, Registered or Certified Mail or Overnight Courier:
LaSalle National Bank
135 South LaSalle Street
Room 1825
Chicago, IL 60603
Attention: Diane Swanson
By Facsimile:
312-904-2236
Attention: Diane Swanson
Confirm by Telephone 312-
904-2936
DELIVERY OF DOCUMENTS TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF DOCUMENTS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF SUCH DOCUMENTS.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. However, additional solicitations may be
made by facsimile, telephone or in person by officers and regular employees of
the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith
and pay other registration expenses, including fees and expenses of the
Trustee, filing fees, blue sky fees and printing and distribution expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered or
if a transfer tax is imposed for any reason other than the exchange of Old
Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
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ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss will be recognized by the Company for accounting
purposes in connection with the Exchange Offer. The expenses of the Exchange
Offer will be amortized over the term of the New Notes.
RESALES OF NEW NOTES
Upon consummation of the Exchange Offer, holders of Old Notes who were not
prohibited from participating in the Exchange Offer and did not tender their
Old Notes will generally not have any registration rights under the
Registration Rights Agreement with respect to such nontendered Old Notes and
such Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. In general, the Old Notes may not be offered
or sold unless registered under the Securities Act and applicable state
securities laws, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register the Old Notes
under the Securities Act.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company has not sought
its own interpretive letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third parties. Based on these
interpretations by the staff of the Commission, the Company believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by a holder (other than
(i) a broker-dealer who purchased Old Notes directly from the Company for
resale pursuant to Rule 144A or any other available exemption under the
Securities Act, (ii) an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act or (iii) a broker-dealer who acquired the Old
Securities as a result of market-making or other trading activities), without
further compliance with the registration and prospectus delivery provisions of
the Securities Act, provided, that such holder is acquiring the New Notes in
the ordinary course of business and is not participating, and has no
arrangement or understanding with any person to participate, in the
distribution of the New Notes. Any holder wishing to accept the Exchange Offer
must represent to the Company, as required by the Registration Rights
Agreement, that (i) it is not an "affiliate" of the Company as defined in Rule
405 of the Securities Act, (ii) it is not a broker-dealer that acquired Old
Notes directly from the Company in order to resell them pursuant to Rule 144A
of the Securities Act or any other available exemption under the Securities
Act, (iii) it will acquire the New Notes in the ordinary course of business
and (iv) it is not participating, and does not intend to participate, and has
no arrangement or understanding with any person to participate, in the
distribution of the New Notes. Any holder of Old Notes that is unable to make
these representations to the Company will not be able to rely on the
interpretations of the staff of the Commission described above and therefore
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale of such Old
Notes unless such sale is made pursuant to an exemption from such
requirements.
Each broker-dealer who receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it acquired the Old Notes for its own
account as a result of market-making activities or other trading activities
and, because it may be deemed a statutory underwriter, must agree that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the staff of the Commission in
the interpretive letters referred to above, the Company believes that
Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the New Notes received upon exchange of such Old
Notes (other than Old Notes that represent an unsold allotment from the
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<PAGE>
original sale of the Old Notes) with a prospectus meeting the requirements of
the Securities Act, which may be the prospectus prepared for an exchange offer
so long as it contains a description of the plan of distribution with respect
to the resale of such New Notes. Accordingly, this Prospectus may be used by a
Participating Broker-Dealer during the period referred to below in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such Participating Broker-Dealer for its own account as
a result of market-making or other trading activities. Subject to certain
provisions and time limitations set forth in the Registration Rights
Agreement, the Company has agreed that this Prospectus may be used by a
Participating Broker-Dealer in connection with resales of such New Notes. See
"Plan of Distribution." However, a Participating Broker-Dealer who intends to
use this Prospectus in connection with the resale of New Notes received in
exchange for Old Notes pursuant to the Exchange Offer must notify the Company,
or cause the Company to be notified, on or prior to the Expiration Date, that
it is a Participating Broker-Dealer. Such notice may be given in the space
provided for that purpose in the Letter of Transmittal or may be delivered to
the Exchange Agent at one of the addresses set forth herein under "--The
Exchange Agent; Assistance." A Participating Broker-Dealer who delivers this
Prospectus to purchasers in connection with resales of New Notes will be
subject to certain of the civil liabilities under the Securities Act and will
be bound by the provisions of the Registration Rights Agreement (including
certain indemnification rights and obligations). Any Participating Broker-
Dealer who is an "affiliate" of the Company may not rely on such interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to The Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Company of
the occurrence of any event or the discovery of any fact which makes any
statement contained in this Prospectus untrue in any material respect or which
causes this Prospectus to omit to state a material fact necessary in order to
make the statements contained herein, in light of the circumstances under
which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of New Notes pursuant to this Prospectus
until the Company has amended or supplemented this Prospectus to correct such
misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer or the Company has
given notice that the sale of the New Notes may be resumed, as the case may
be.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who are permitted to participate in the Exchange Offer
and who do not tender their Old Notes generally will not have any further
registration rights under the Registration Rights Agreement or otherwise.
Accordingly, any holder that does not exchange such holder's Old Notes for New
Notes will continue to hold the untendered Old Notes and will be entitled to
all the rights and limitations applicable thereto under the Indenture, except
to the extent that such rights or limitations, by their terms, terminate or
cease to have further effectiveness as a result of the Exchange Offer.
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will continue to be subject to the restrictions on transfer contained in
the legend thereon. In general, the Old Note may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register the Old Notes under the Securities Act. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) pursuant to an effective registration statement under the Securities Act,
(iii) so long as the Old Notes are eligible for resale pursuant to Rule 144A,
to a Qualified Institutional Buyer (as defined in the Securities Act) in a
transaction meeting the requirements of Rule 144A, (iv) outside the United
States to a foreign person pursuant to the exemption from the registration
requirements of the Securities Act provided by Regulation S, (v) to an
institutional "accredited investor" (as defined in the Securities Act) in a
transaction exempt from the registration requirements of the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States or other applicable jurisdiction, or (vi) pursuant to any
other available exemption from the registration requirements of the Securities
Act.
29
<PAGE>
MISCELLANEOUS
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
The Company may in the future seek to acquire untendered Old Notes, to the
extent permitted by applicable law, in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no present plans to acquire any Old Notes that are not tendered in the
Exchange Offer or to file a registration statement to permit resales of any
untendered Old Notes.
HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS IN
CONNECTION WITH THE EXCHANGE OFFER.
30
<PAGE>
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of the Old Notes
for New Notes pursuant to the Exchange Offer.
The net proceeds to the Company from the Offering were approximately $96.1
million, after deducting the Initial Purchasers' discount and other expenses
related to the Offering. The Company used the net proceeds of the Offering as
follows: (i) approximately $58.0 million to repay certain notes and other
indebtedness described below; (ii) approximately $19.3 million to consummate
the DMC Acquisition, (iii) $7.0 million to pay a dividend to holders of the
Company's capital stock, (iv) approximately $1.5 million to purchase an
84,000-square-foot facility for the assembly of the Company's products in Mt.
Olive, North Carolina, and (v) approximately $10.3 million for general
corporate purposes. Prior to the application of the net proceeds from the
Offering as described above, such funds were invested in short-term,
investment grade securities.
The notes and other indebtedness that were repaid with a portion of the net
proceeds to the Company from the Offering consisted of the following: (i)
$35.8 million outstanding as of September 30, 1997 under the credit agreement,
dated as of April 26, 1995, as amended (the "Bank Credit Facility"), between
the Company and LaSalle National Bank (the "Bank"), including $32.8 million
under the revolver, which bore interest at a variable rate based on the prime
rate or LIBOR (7.6% at September 30, 1997), and was scheduled to mature on May
31, 1999, and $3.0 million under a term note, which bore interest at a
variable rate based on the prime rate (8.8% at September 30, 1997) and was
scheduled to mature on June 1, 2001; (ii) $17.1 million principal amount of
Stockholder Notes (as defined herein) outstanding as of September 30, 1997,
which were repurchased at a discount for approximately $15.2 million, and
which bore interest at 8% and were scheduled to mature on either May 1, 2002
or May 1, 2006 (see "Certain Relationships and Related Transactions--
Management Buyout--Redemption Agreements"); (iii) $3.5 million outstanding as
of September 30, 1997 under a note payable to The CIT Group/Equipment
Financing, Inc., which bore interest at 9% and was scheduled to mature on
April 30, 2000; (iv) $2.6 million outstanding under a note payable to
Metropolitan Life Insurance Company, which bore interest at 8.45% and was
scheduled to mature on July 1, 2006; (v) $0.8 million outstanding as of
September 30, 1997 under a note payable to American National Bank, which bore
interest at 82% of the bank's prime rate and was scheduled to mature on
November 1, 2007; and (vi) $0.1 million outstanding under a capital lease on
equipment, which bore interest at 8% and was scheduled to mature on March 1,
1998. Such notes and other indebtedness constituted approximately 95% of the
Company's indebtedness prior to the Offering. See Note 7 to Consolidated
Financial Statements.
31
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company as of September 30, 1997 and as adjusted to give effect to the
Offering, the application of the net proceeds therefrom and the DMC
Acquisition. The information set forth below should be read in conjunction
with the Consolidated Financial Statements and notes thereto contained
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1997
------------------
AS
ACTUAL ADJUSTED
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................ $ 2,870 $ 13,317
======== ========
Long-term debt and capital leases (including current
portions):
Bank Credit Facility................................... $ 32,822 $ --
Notes offered hereby (net of unamortized discount of
$769)................................................. -- 99,231
Other notes payable.................................... 29,995 2,727(1)
-------- --------
Total debt........................................... 62,817 101,958
-------- --------
Stockholders' equity:
Voting common stock, par value $.01 per share,
6,900,000 shares authorized, 1,800,000 issued and
outstanding........................................... 18 18
Non-voting common stock, par value $.01 per share,
1,100,000 shares authorized, 200,000 shares issued and
outstanding........................................... 2 2
Additional paid-in capital............................. 2,473 2,473
Cumulative translation adjustment...................... (411) (411)
Retained earnings...................................... 24,672 19,620
Treasury stock, at cost, 4,833,652 shares voting common
stock; 859,316 shares non-voting common stock......... (25,533) (25,533)
-------- --------
Total stockholders' equity (deficit)................. 1,221 (3,831)
-------- --------
Total capitalization................................. $ 64,038 $ 98,127
======== ========
</TABLE>
- --------
(1) Consist of the following: (i) $2.1 million outstanding as of September 30,
1997 under a note payable to Citizens National Bank, which bears interest
at 6.5% and matures on April 1, 2010 and (ii) $0.6 million outstanding as
of September 30, 1997 under a note payable to shareholders of Clark
Products, Inc., which bears interest at 10% and matures on June 26, 2001.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
32
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
Set forth below is certain selected historical consolidated financial and
operating data for the Company as of and for the years ended December 31,
1992, 1993, 1994, 1995 and 1996 and as of and for the nine months ended
September 30, 1996 and 1997. The selected historical consolidated financial
data as of and for the full years indicated were derived from the consolidated
financial statements of the Company, which were audited by Arthur Andersen
LLP. The selected historical consolidated financial data as of and for the
nine months ended September 30, 1996 and 1997 are unaudited but, in the
opinion of the Company's management, reflect all adjustments necessary for a
fair presentation of the results of operations for such periods. The results
for the nine months ended September 30, 1997 are not necessarily indicative of
results to be expected for the full year. The information set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and notes thereto contained elsewhere in this Offering Memorandum.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- ------------------
1992(1) 1993(1) 1994(1) 1995(1) 1996 1996 1997
------- ------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Net sales............... $68,402 $94,427 $130,852 $141,191 $178,537 $137,479 $171,965
Cost of sales........... 52,066 76,053 106,037 115,004 135,696 104,489 129,967
------- ------- -------- -------- -------- -------- --------
Gross profit............ 16,336 18,374 24,815 26,187 42,841 32,990 41,998
Selling, general and
administrative
expenses............... 7,841 14,122 19,497 22,176 28,787 21,417 25,461
------- ------- -------- -------- -------- -------- --------
Operating income........ 8,495 4,252 5,318 4,011 14,054 11,573 16,537
Interest expense........ (721) (1,175) (1,934) (2,894) (3,590) (2,524) (3,712)
Write-off of affiliate
receivable............. -- -- -- (3,423)(2) -- -- --
Other income (expense),
net.................... 45 (166) 461 548 517 239 299
------- ------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations.. 7,819 2,911 3,845 (1,758) 10,981 9,288 13,124
Income (loss) from
discontinued
operations............. (826) (880) (554) 280 (482) (482) --
Extraordinary gain
(loss) on
extinguishment of debt. -- -- (279) -- -- -- --
------- ------- -------- -------- -------- -------- --------
Net income (loss)....... $ 6,993 $ 2,031 $ 3,012 $ (1,478) $ 10,499 $ 8,806 $ 13,124
======= ======= ======== ======== ======== ======== ========
OTHER DATA:
Depreciation and
amortization........... $ 1,412 $ 2,076 $ 2,679 $ 3,351 $ 3,073 $ 2,319 $ 2,318
Capital expenditures.... $ 3,325 $ 5,520 $ 10,907 $ 5,816 $ 3,834 $ 2,610 $ 4,105
EBITDA(4)............... $ 9,952 $ 6,162 $ 8,458 $ 7,910 $ 17,644 $ 14,131 $ 19,154
EBITDA margin........... 14.5% 6.5% 6.5% 5.6% 9.9% 10.3% 11.1%
EBITDA to interest...... 13.80 5.24 4.37 2.73 4.91 5.60 5.16
Total debt to EBITDA.... 0.77 3.08 3.61 4.29 2.72 -- --
Earnings to fixed
charges................ 9.87x 3.06x 2.66x (3) 3.73x 4.27x 4.19x
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............ $26,798 $44,381 $ 60,205 $ 66,421 $ 67,572 $ 77,528 $ 96,104
Working capital......... 8,303 4,424 3,984 8,085 15,252 20,925 33,855
Total debt.............. 7,671 18,953 30,546 33,930 47,906 52,502 62,817
Total stockholders'
equity (deficit)....... 12,084 13,105 14,365 12,887 (5,381)(5) (4,253) 1,221
</TABLE>
- --------
(1) In December 1995, the Company signed an agreement to sell the working
capital and fixed assets of its Heritage Vinyl Division. In January 1996,
the sale was closed. The Company's 1994 and prior year financial
statements were restated to reflect this discontinued operation. See Note
3 to Consolidated Financial Statements.
(2) The write-off of the affiliate receivable resulted from a significant
customer, who is an affiliate of the Company, ceasing distribution
operations and selling its only division in December 1995. The write-off
of the affiliate receivable represents the portion of the remaining
receivable due that was not collectible. See Note 11 to Consolidated
Financial Statements.
33
<PAGE>
(3) The ratio of earnings to fixed charges is expressed as the ratio of fixed
charges plus pretax earnings to fixed charges. Fixed charges include
interest on borrowings, amortization of deferred financing costs and the
interest portion of rent expense. Earnings were insufficient to cover
fixed charges for the year ended December 31, 1995 by $1.8 million.
(4) EBITDA represents income from continuing operations (excluding the write-
off of an affiliate receivable) plus interest expense (including
amortization of debt issuance costs), depreciation and amortization.
EBITDA is presented here to provide additional information about the
Company's ability to meet its future debt service, capital expenditure and
working capital requirements. EBITDA is not a measure of financial
performance under GAAP and should not be considered as an alternative
either to net income as an indicator of the Company's operating
performance, or to cash flows as a measure of the Company's liquidity.
(5) Total stockholders' deficit at December 31, 1996 resulted from a
management buyout of the Company's capital stock in June 1996. The Company
purchased its capital stock from selling shareholders using cash and
notes. In order to fund a portion of the cash payments made by the
Company, the Company obtained a $4.0 million term loan. See "Certain
Relationships and Related Transactions--Management Buyout" and Note 6 to
Consolidated Financial Statements.
34
<PAGE>
PRO FORMA FINANCIAL DATA
The following unaudited pro forma condensed combined balance sheet of the
Company gives effect to the Offering, the application of the net proceeds
therefrom and the DMC Acquisition as if such transactions had occurred on
September 30, 1997. The following unaudited pro forma combined statements of
income of the Company give effect to the Offering, the application of the net
proceeds therefrom and the DMC Acquisition as if such transactions had
occurred on the first day of the periods presented. The DMC Acquisition was
consummated on November 5, 1997. See "Business--DMC Acquisition."
For purposes of the accompanying pro forma combined financial statements,
acquisition-related adjustments, all made pursuant to the purchase method of
accounting, and other adjustments, have been reflected on an estimated basis
using the most recent information available. No assurances can be given that
the final determinations of the fair value of assets acquired and liabilities
assumed by the Company in the DMC Acquisition will not differ from the
adjustments presented herein. Such determinations will be made within one year
of the DMC Acquisition and are not expected to be materially different from
the estimates used herein.
The unaudited pro forma combined financial statements should be read in
conjunction with the separate historical financial statements and related
notes thereto of the Company and DMC included elsewhere in this Offering
Memorandum. The pro forma combined financial statements do not purport to be
indicative of the results that actually would have been obtained had all the
transactions been completed as of the assumed dates and for the periods
presented and are not intended to be a projection of future results or trends.
Operating results for any interim period are not necessarily indicative of
results that may be expected for the full year.
35
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO
GSI ADJUSTMENTS FORMA
GROUP DMC (NOTE 1) COMBINED
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............ $ 2,870 $ 98 $ 10,349 $ 13,317
Accounts receivable.................. 30,012 4,891 -- 34,903
Inventories.......................... 28,600 4,713 2,804 36,117
Prepaid expenses..................... 642 47 -- 689
Other................................ 7,178 154 -- 7,332
-------- ------- -------- --------
Total current assets............... 69,302 9,903 13,153 92,358
Property, plant and equipment, net..... 23,364 3,092 4,908 31,364
Excess cost over net assets acquired... 1,677 -- 7,278 8,955
Other assets........................... 1,761 119 2,998 4,878
-------- ------- -------- --------
Total assets....................... $ 96,104 $13,114 $ 28,337 $137,555
======== ======= ======== ========
Current liabilities:
Accounts payable..................... $ 12,374 $ 1,502 $ -- $ 13,876
Dividends payable.................... 6,074 -- -- 6,074
Accrued other liabilities............ 11,167 855 500 12,522
Current maturities of long-term debt. 3,381 138 (3,181) 338
Notes payable--bank.................. -- 400 (400) --
Income taxes payable................. -- 1,294 -- 1,294
Other................................ 2,451 -- -- 2,451
-------- ------- -------- --------
Total current liabilities.......... 35,447 4,189 (3,081) 36,555
-------- ------- -------- --------
Long-term debt, less current
maturities............................ 59,436 904 41,280 101,620
-------- ------- -------- --------
Deferred income taxes.................. -- 126 3,085 3,211
-------- ------- -------- --------
Stockholders' equity (deficit):
Common stock......................... 20 246 (246) 20
Paid-in capital...................... 2,473 -- -- 2,473
Cumulative translation adjustment...... (411) -- -- (411)
Retained earnings...................... 24,672 7,649 (12,701) 19,620
Treasury stock......................... (25,533) -- -- (25,533)
-------- ------- -------- --------
Total stockholders' equity......... 1,221 7,895 (12,947) (3,831)
-------- ------- -------- --------
Total liabilities and stockholders'
equity............................ $ 96,104 $13,114 $ 28,337 $137,555
======== ======= ======== ========
</TABLE>
36
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
GSI GROUP DMC YEAR
YEAR ENDED ENDED PRO FORMA
DECEMBER 31, OCTOBER 31, ADJUSTMENTS PRO FORMA
1996 1996 (NOTE 2) COMBINED
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales..................... $ 178,537 $24,784 $ -- $ 203,321
Cost of sales................. 135,696 19,030 701 155,427
---------- ------- ------- ----------
Gross profit................ 42,841 5,754 (701) 47,894
Selling, general and
administrative expenses...... 28,787 3,156 182 32,125
---------- ------- ------- ----------
Operating income............ 14,054 2,598 (883) 15,769
Interest expense.............. (3,590) (398) (6,971) (10,959)
Other income, net............. 517 -- -- 517
---------- ------- ------- ----------
Income from continuing
operations................. 10,981 2,200 (7,854) 5,327
Loss from discontinued
operations................... (482) -- -- (482)
Extraordinary gain on early
retirement
of debt...................... -- -- 1,875 1,875
Provision (benefit) for income
taxes........................ -- 848 (121) 727
---------- ------- ------- ----------
Net income.................. $ 10,499 $ 1,352 $(5,858) $ 5,993
========== ======= ======= ==========
Net income per common share... $ 5.53 $ 3.15
========== ==========
Weighted average common
shares....................... 1,900,000 1,900,000
========== ==========
</TABLE>
37
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
GSI GROUP DMC
NINE MONTHS NINE MONTHS
ENDED ENDED PRO FORMA
SEPTEMBER 30, JULY 31, ADJUSTMENTS PRO FORMA
1997 1997 (NOTE 2) COMBINED
------------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales..................... $ 171,965 $16,325 $ -- $ 188,290
Cost of sales................. 129,967 12,381 526 142,874
--------- ------- ------- ---------
Gross profit................ 41,998 3,944 (526) 45,416
Selling, general and
administrative expenses...... 25,461 2,114 137 27,712
--------- ------- ------- ---------
Operating income............ 16,537 1,830 (663) 17,704
Interest expense.............. (3,712) (131) (4,284) (8,127)
Other income.................. 299 -- -- 299
Provision (benefit) for income
taxes........................ -- 679 (158) 521
--------- ------- ------- ---------
Net income.................. $ 13,124 $ 1,020 $(4,789) $ 9,355
========= ======= ======= =========
Net income per common share... $ 6.56 $ 4.68
========= =========
Weighted average common
shares....................... 2,000,000 2,000,000
========= =========
</TABLE>
38
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1.--ADJUSTMENTS TO THE SEPTEMBER 30, 1997 CONDENSED COMBINED BALANCE SHEET
<TABLE>
<S> <C> <C>
Cash and cash equivalents--
Net cash proceeds relating to issuance of the Notes, payoff
of certain existing notes and certain other indebtedness,
payment of dividends and DMC Acquisition.................. $ 10,349
========
Inventories--
Revaluation of DMC's inventories to estimated market value. $ 2,804
========
Property, plant and equipment--
Revaluation of DMC's property, plant and equipment to
estimated fair market value............................... $ 4,908
========
Excess cost over net assets acquired--
Purchase price of DMC's capital stock...................... $19,300
Historical net assets of DMC............................... (7,895)
Adjustments to estimated fair value........................ (4,127)
-------
Excess cost over net assets acquired in the DMC
Acquisition.............................................. $ 7,278
========
Other assets--
Estimated deferred financing costs related to the Offering. $ 3,150
Write-off of prior unamortized deferred financing costs of
the Company............................................... (152)
--------
$ 2,998
========
Accrued other liabilities--
Revaluation of DMC's asset and liability valuation reserves
based on the Company's methodologies...................... $ 500
========
Current maturities of long-term debt--
Retirement of existing notes and certain other
indebtedness.............................................. $ (3,181)
========
Notes payable--
Retirement of DMC's notes payable.......................... $ (400)
========
Long-term debt, less current maturities--
Incurrence of Notes (net of unamortized discount of $769).. $ 99,231
Retirement of existing Company and DMC debt................ (57,951)
--------
$ 41,280
========
Deferred income taxes--
Net deferred income tax liabilities related to revaluation
of DMC's net assets....................................... $ 3,085
========
Common stock--
Elimination of DMC's common stock.......................... $ (246)
========
Retained earnings--
Elimination of DMC's retained earnings..................... $ (7,649)
Extraordinary gain on early retirement of Subchapter "S"
corporation shareholder debt, net of extraordinary loss
due to the write-off of unamortized deferred financing
costs related to the early extinguishment of the Company's
existing notes and certain other indebtedness............. 1,948
Payment of dividend........................................ (7,000)
--------
$(12,701)
========
</TABLE>
39
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2.--ADJUSTMENTS TO THE COMBINED STATEMENTS OF INCOME RELATED TO THE
OFFERING AND DMC ACQUISITION
<TABLE>
<CAPTION>
NINE
YEAR MONTHS
ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Cost of goods sold--
Depreciation of property, plant and equipment
increased to fair market
value............................................ $ 701 $ 526
======= =======
Amortization--
Amortization of goodwill related to the DMC
Acquisition (40 year life)....................... $ 182 $ 137
======= =======
Interest expense--
Elimination of interest expense related to debt
which was retired with the Offering.............. $(3,592) $(3,638)
Interest expense on the Notes (10.25% annually)... 10,171 7,628
Amortization of deferred financing costs incurred
by the Company to finance the Offering and the
DMC Acquisition (10 years)....................... 315 236
Amortization of discount (10 years)............... 77 58
------- -------
$ 6,971 $ 4,284
======= =======
Extraordinary item--
Gain on early extinguishment of former
stockholders' notes.............................. $ 1,875 $ --
======= =======
Benefit for income taxes--
Income tax effect of the pro forma adjustments
related to DMC at DMC's effective tax rate (40%). $ (121) $ (158)
======= =======
</TABLE>
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and the notes thereto appearing elsewhere in this
Prospectus.
GENERAL
The Company is a leading manufacturer and supplier of agricultural equipment
and services worldwide. The Company's grain, swine and poultry products are
used by producers and purchasers of grain, and by producers of swine and
poultry. Fluctuations in grain and feed prices directly impact sales of the
Company's grain equipment. Because the primary cost of producing swine and
poultry is the cost of the feed grain consumed by animals, fluctuations in the
supply and cost of grain to users of the Company's products also can impact
sales of the Company's swine and poultry equipment. The Company believes,
however, that its diversified product offerings mitigate some of the effects
of fluctuations in the price of grain since the demand for grain storage,
drying and handling equipment tends to increase during periods of higher grain
prices, which somewhat offsets the reduction in demand during such periods for
the Company's products by producers of swine and poultry. See "Business--
Industry Overview."
Sales of agricultural equipment are seasonal, with farmers traditionally
purchasing grain storage bins and grain drying and handling equipment in the
summer and fall in conjunction with the harvesting season, and swine and
poultry producers purchasing equipment during prime construction periods in
the spring, summer and fall. The Company's net sales and net income have
historically been lower during the first and fourth fiscal quarters as
compared to the second and third quarters. See "Risk Factors--Agricultural
Industry; Seasonality."
Although the Company's sales are primarily denominated in U.S. dollars and
are not affected by currency fluctuations, the production costs, profit
margins and competitive position of the Company are affected by the strength
of the U.S. dollar relative to the strength of the currencies in countries
where its products are sold. With respect to sales that are not denominated in
U.S. dollars, the Company seeks to hedge against currency fluctuations on a
limited basis. In 1996, the Company's foreign sales accounted for 31% of net
sales. See "Risk Factors--International Operations; Exposure to Foreign
Currency Risk."
The primary raw materials used by the Company to manufacture its products
are steel and polymers. Fluctuations in the prices of steel and, to a lesser
extent, polymer materials can impact the Company's cost of sales. From 1994
through 1996, the price of steel and polymers remained relatively constant.
The Company has experienced modest price decreases in steel and polymers
during 1997. See "Risk Factors--Raw Materials Price Volatility."
The Company's current business was founded in 1972 as a subsidiary of the
Sloan Implement Company, Inc. ("Sloan Implement"), a distributor of John Deere
farm equipment owned by the Sloan family. This subsidiary was later merged
into Sloan Implement and became its manufacturing division and Sloan Implement
changed its name to Grain Systems, Inc. ("Grain Systems"). In 1994, the farm
equipment distributor division of Grain Systems was spun off as a newly-formed
corporation with the manufacturing division surviving as Grain Systems. The
Company's 1994 and prior year financial statements were restated to exclude
the results of operations and financial position of the farm equipment
distributor division. In 1995, Grain Systems changed its name to The GSI
Group, Inc. and in 1996, all of the capital stock of the Company was acquired
by Craig Sloan and certain other executives of the Company. See "Certain
Relationships and Related Transactions--Management Buyout." The Company
currently operates as a Subchapter "S" corporation and, accordingly, is not
subject to federal income taxation for the periods for which financial
information has been presented herein. Because the Company's stockholders are
subject to tax liabilities based on their pro rata shares of the Company's
income, it is the Company's policy to make periodic distributions to its
stockholders in amounts equal to such tax liabilities. See "Certain
Relationships and Related Transactions--Other Related Party Transactions."
41
<PAGE>
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Net sales increased 25.1% or $34.5 million to $172.0 million in the nine
months ended September 30, 1997 compared to $137.5 million in the
corresponding period of 1996. This increase was primarily a result of
increased sales of grain storage products resulting primarily from
historically high domestic grain prices in 1996, increased sales of swine
equipment resulting primarily from continuing strong construction demand for
larger swine facilities, and increased international sales of swine, poultry
and grain storage equipment resulting primarily from regional market
penetration and successful bids on turn-key grain storage projects.
Gross profit increased to $42.0 million in the nine months ended September
30, 1997 or 24.4% of net sales compared to $33.0 million or 24.0% of net sales
in the corresponding period of 1996. This increase reflected the impact of
increased sales, as well as the benefit of price increases in certain product
lines. These positive impacts were offset by a change in sales mix towards
lower margin products within the swine product line.
Selling, general and administrative expenses increased 18.9% or $4.0 million
to $25.5 million in the nine months ended September 30, 1997 from $21.4
million in the corresponding period of 1996. As a percentage of net sales,
however, selling, general and administrative expenses decreased to 14.8% in
the nine months ended September 30, 1997 compared to 15.6% in the
corresponding period in 1996. This decrease reflected the Company's ability to
increase sales volume without a corresponding increase in the number of
selling and administrative personnel despite an increase in the bad debt
reserve of $1.1 million.
Operating income increased 42.9% or $5.0 million to $16.5 million in the
nine months ended September 30, 1997 compared to $11.6 million in the
corresponding period of 1996. Operating income margins increased to 9.6% of
net sales in the nine months ended September 30, 1997 from 8.4% in the
corresponding period of 1996. These increases were attributable to the 25.1%
increase in sales and were offset by increased selling, general and
administrative expenses.
Interest expense increased $1.2 million for the nine months ended September
30, 1997, reflecting borrowings used to fund the Company's redemption of
certain shares of its voting common stock in June 1996. See "Certain
Relationships and Related Transactions--Management Buyout."
Net income increased 49.0% or $4.3 million to $13.1 million for the nine
months ended September 30, 1997 compared to $8.8 million in the corresponding
period of 1996. This increase was due to increased net sales and gross profit
margin and reduced selling, general and administrative expenses as a
percentage of net sales, as noted above.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales increased 26.4% or $37.3 million to $178.5 million in 1996
compared to $141.2 million in 1995. This increase was primarily a result of
increased sales of grain storage products resulting primarily from
historically high domestic grain prices, increased sales of swine equipment
resulting primarily from strong construction demand for larger swine
facilities, and increased international sales of swine, poultry and grain
storage equipment resulting primarily from regional market penetration and
successful bids on turn-key grain storage projects.
Gross profits increased to $42.8 million in 1996 or 24.0% of net sales
compared to $26.2 million in 1995 or 18.5% of net sales. The increase in gross
profit reflected the impact of increased sales, as well as the benefit of
price increases in certain product lines, together with operating efficiencies
and the return of certain raw material prices to levels more consistent with
recent historical levels. The positive impacts of the above items were
partially offset by a change in sales mix towards newly-introduced, lower
margin products within the swine product line.
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Selling, general and administrative expenses increased 29.8% or $6.6 million
to $28.8 million in 1996 from $22.2 million in 1995. As a percentage of net
sales, selling, general and administrative expenses increased to 16.1% in 1996
from 15.7% in 1995. These increases were primarily a result of the
introduction of a two-year employee bonus incentive program driven by total
company profitability and increased staffing in the international
sales/engineering functions, partially offset by the elimination of certain
non-essential positions in corporate functions and an increase in distribution
expense.
Operating income increased 250.4% or $10.0 million to $14.1 million for 1996
compared to $4.0 million for 1995. Operating income margins increased in 1996
to 7.9% of net sales in 1996 from 2.8% in 1995. These increases were
attributable to the 26.4% increase in net sales and improved gross margins and
were offset by increased selling, general and administrative expenses.
Interest expense increased $0.7 million for 1996, reflecting additional
borrowings used to fund the Company's redemption of certain shares of its
voting common stock in June 1996. See "Certain Relationships and Related
Transactions--Management Buyout." Interest income was essentially flat in 1996
compared to 1995.
Net income increased $12.0 million to $10.5 million in 1996 compared to a
loss of $1.5 million in 1995. This increase was due to increased operating
income and the negative impact in 1995 of the $3.4 million write-off of an
affiliate receivable. There was no write-off of an affiliate receivable in
1996.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net sales increased 7.9% or $10.3 million to $141.2 million in 1995 compared
to $130.9 million in 1994. This increase was primarily driven by strong
international market penetration for grain storage, swine and poultry
products.
Gross profits increased to $26.2 million in 1995 from $24.8 million in 1994,
representing 18.5% of net sales in 1995 and 19.0% of net sales in 1994. This
decrease in gross profit percentage on slightly higher sales volume reflected
the impact of the aggressive bidding on contracts in the international market.
Selling, general and administrative expenses increased 13.7% or $2.7 million
to $22.2 million in 1995 from $19.5 million in 1994. As a percentage of net
sales, selling, general and administrative expenses increased to 15.7% in 1995
from 14.9% in 1994. These increases were primarily the result of the hiring of
professional staff for focused product grouping support.
Operating income decreased 24.6% or $1.3 million to $4.0 million for 1995
compared to $5.3 million for 1994. Operating income margins decreased to 2.8%
of net sales in 1995 from 4.1% in 1994. These decreases were attributable to
lower margin product mix and increased selling, general and administrative
expenses.
Interest expense increased by $1.0 million for 1995 reflecting expanded
working capital needs. Other expense increased $3.4 million in 1995 due to the
non-recurring write-off of an affiliate receivable.
The Company experienced a loss of $1.5 million in 1995 compared to net
income of $3.0 million in 1994. This loss was due to decreased operating
income and the $3.4 million write-off of an affiliate receivable.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded capital expenditures, working capital
requirements, debt service, stockholder dividends and stock repurchases from
cash flow from its operations, augmented by temporary borrowings made under
various credit agreements.
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The Company's working capital requirements for its operations are seasonal,
with investments in working capital typically building in the second and third
quarters and then declining in the first and fourth quarters. As of December
31, 1996, the Company had $15.3 million of working capital, an increase of
$7.2 million from working capital as of December 31, 1995. The increase in
working capital was primarily due to an increase in accounts receivables and a
$10.8 million decrease in short-term debt associated with the repayment of
outstanding bank notes, partially offset by the establishment of a $5.5
million dividend payable. As of September 30, 1997, the Company had working
capital of $33.9 million, as compared to working capital of $15.3 million at
December 31, 1996.
Operating activities generated $1.5 million, $2.4 million and $1.7 million
in cash flow in each of 1994, 1995 and 1996, respectively. The increase in
cash flow from operating activities from 1994 to 1995 of $0.9 million was
primarily a result of a reduction of accounts receivable and lower inventory
purchases of $4.6 million offset by a net loss of $1.5 million recorded in
1995 compared to net income of $3.0 million in 1994. The decrease in cash flow
from operating activities from 1995 to 1996 of $0.7 million was primarily the
result of an increase of accounts receivable and inventories of $4.5 million
and a decrease of accounts payable, accrued expenses and customer deposits of
$4.5 million, offset by net income of $10.5 million in 1996 compared to a net
loss of $1.5 million in 1995.
The Company provided $0.9 million of cash flow for the nine months ended
September 30, 1996, while it used $1.3 million for the nine months ended
September 30, 1997. The $2.3 million decrease in operating cash flow was
primarily the result of the Company's decision to increase inventory levels in
anticipation of customer demand in 1997, partially offset by a $4.3 million
increase in net income for the nine months ended September 30, 1997 compared
to the corresponding period of 1996.
The Company's capital expenditures totaled $10.9 million, $5.8 million and
$3.8 million in 1994, 1995 and 1996, respectively. Capital expenditures have
primarily been for machinery and equipment and the purchase and expansion of
facilities. The Company anticipates that capital expenditures will average
approximately $6.0 million to $7.0 million per year over the next five years.
Other investing activities that resulted in significant cash flow included
$8.0 million in proceeds from the sale of net assets of a discontinued
business, $2.1 million in payments received on notes receivable, and $1.4
million in proceeds from sales of fixed assets, all of which occurred in 1996.
For the nine months ended September 30, 1997, cash used for investing
activities was primarily used for capital expenditures.
Cash provided by financing activities in 1994 and 1995 was $9.2 million and
$3.8 million, respectively. The cash resulted primarily from a net $6.8
million issuance of long-term debt and from $5.8 million of borrowings under
lines of credit in 1994, and $3.5 million in net borrowings under the Bank
Credit Facility in 1995. Cash used in financing activities for 1996 consisted
primarily of $25.5 million for the acquisition of treasury stock partially
offset by $17.5 million in proceeds from the repayment of former stockholder
loans and $2.3 million in proceeds from the issuance of common stock.
The Company acquired the assets of Clark Products, Inc. in February 1997 for
an aggregate purchase price of approximately $1.6 million. The Clark
acquisition was funded primarily through available cash and borrowings under
various credit facilities.
The Company sold the assets of its Heritage Vinyl Products Division in
January 1996 and applied the net proceeds of approximately $8.0 million to
reduce outstanding indebtedness under various credit facilities. The Company
has restated 1994 and prior year financial statements to present continuing
operations without the discontinued operations of the division.
The Company acquired all of the capital stock of DMC for an aggregate
purchase price of $19.3 million on November 5, 1997. The Company funded the
DMC Acquisition with a portion of the net proceeds from the Offering. See "Use
of Proceeds" and "Business--DMC Acquisition."
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The Company plans to continue to pursue a selective acquisition strategy
which may result in the need for additional debt or equity financing in the
future.
Upon consummation of the Offering, approximately 95% of the Company's
indebtedness was repaid with the net proceeds of the Offering. Also, upon
consummation of the Offering, the New Credit Agreement provided a revolving
credit and letter of credit facility of $40 million terminating in November
2000 with no scheduled amortization. Revolving loans under the New Credit
Agreement are available for working capital and general corporate purposes.
See "Description of the New Credit Agreement."
The Company believes that existing cash, cash flow from operations and
available borrowings under the New Credit Agreement will be sufficient to
support its working capital, capital expenditures and debt service
requirements for the foreseeable future.
INFLATION
The Company believes that inflation has not had a material effect on its
results of operations or financial condition during recent periods.
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BUSINESS
INTRODUCTION
The Company is a leading manufacturer and supplier of agricultural equipment
and services worldwide. The Company believes that it is the largest global
provider of both (i) grain storage bins and related drying and handling
systems and (ii) swine feed storage, feed delivery, confinement and
ventilation systems. The Company also is one of the largest global providers
of poultry feed storage, feed delivery, watering, ventilation, nesting, egg-
handling and hatching systems. The Company markets its agricultural products
in approximately 75 countries through a network of over 1,600 independent
dealers to grain, swine and poultry producers primarily under its GSI(R),
AP(TM) and Cumberland(R) brand names. The Company's current market position in
the industry reflects both the strong, long-term relationships the Company has
developed with its customers as well as the quality and reliability of its
products.
Craig Sloan, the Chief Executive Officer of the Company, founded its current
business in 1972. In 1995, the Company recruited additional management and in
1996, all of the capital stock of the Company was acquired by Mr. Sloan and
certain other executives of the Company. The Company's new management-led
ownership has implemented a growth strategy designed to position the Company
as the premier worldwide manufacturer and supplier of high-quality, cost
efficient grain, swine and poultry systems. In addition to capitalizing on
domestic and international growth opportunities, the Company's new management
has focused on profitability, production efficiencies and cost reductions
commenced during 1995. As a result, the Company has experienced rapid growth
in recent years. Net sales and operating income increased from $141.2 million
and $4.0 million, respectively, in 1995 to $178.5 million and $14.1 million,
respectively, in 1996, and were $172.0 million and $16.5 million,
respectively, for the nine months ended September 30, 1997. EBITDA increased
from $7.9 million in 1995 to $17.6 million in 1996, and was $19.2 million for
the nine months ended September 30, 1997. On a pro forma basis after giving
effect to the Offering, the application of the net proceeds therefrom and the
DMC Acquisition, EBITDA would have been $26.9 million for the twelve months
ended September 30, 1997.
The primary users of the Company's grain storage, drying and handling
products are farm operators or commercial businesses, such as the Archer-
Daniels-Midland Company and Cargill, Inc., that operate feed mills, grain
elevators, port storage facilities and commercial grain processing facilities.
The Company believes that its grain storage, drying and handling equipment is
superior to that of its principal competitors on the basis of strength,
durability, reliability, design efficiency and breadth of product offering.
The Company's feeding and ventilation systems are used primarily by growers
that raise swine and poultry, typically on a contract basis for large
integrators such as Murphy Family Farms, Perdue Farms Incorporated and Tyson
Foods, Inc. Because swine and poultry growers are partially compensated by
integrators based on the efficiency with which they convert feed to meat (the
"feed-to-meat ratio"), they seek to purchase systems which minimize the feed-
to-meat ratio. As a result of its proprietary designs, the Company believes
that its swine and poultry systems are the most effective in the industry in
serving this customer objective.
The industry in which the Company operates is characterized both
domestically and internationally by a few large companies, such as the
Company, with broad product offerings and numerous small manufacturers of
niche product lines. Domestically, the Company intends to build on its
established presence in the grain, swine and poultry markets. Internationally,
the Company intends to capitalize on growth opportunities arising from still-
developing agricultural industries and favorable trends in the demand for
grain, poultry and swine products. The Company believes that less functionally
sophisticated and efficient grain storage systems used by facilities located
outside the U.S. and Western Europe, which experience relatively high levels
of grain spoilage and loss, are increasingly likely to be replaced by more
modern systems. The Company also believes that the significant economic and
population growth occurring in the Company's international markets will
continue to result in consumers devoting larger portions of their income to
improved and higher-protein diets, stimulating stronger demand for poultry,
and to a lesser extent, pork. The Company believes that it is well-positioned
to capture expected increases in worldwide demand for its products resulting
from these industry trends because of its leading brand names, broad and
diversified product lines, strong distribution network and high-quality
products. See "--Industry Overview."
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The Company was incorporated in Delaware on April 30, 1964. The Company's
principal executive office is located at 1004 East Illinois Street,
Assumption, Illinois 62510 and its telephone number is (217) 226-4421.
COMPANY STRENGTHS
MARKET LEADER. The Company believes that it is the largest global provider
of both (i) grain storage bins and related drying and handling systems and
(ii) swine feed storage, feed delivery, confinement and ventilation systems.
The Company also is one of the largest global providers of poultry feed
storage, feed delivery, watering, ventilation, nesting, egg-handling and
hatching systems. The Company intends to continue to build its market share by
capitalizing on its strong reputation and the growth trends in worldwide
demand for grain, swine and poultry production.
PROVIDER OF FULLY-INTEGRATED SYSTEMS. The Company offers a broad range of
products that permits customers to purchase all of their grain, swine and
poultry production needs from one supplier. The Company believes that
providing fully-integrated systems significantly lowers total production costs
and enhances producer productivity by offering compatible products designed to
promote synergies and achieve maximum operating results. Dealers who purchase
fully-integrated systems also benefit from lower administrative and shipping
costs and the ease of dealing with a single supplier. The Company intends to
maintain its position as a provider of fully-integrated systems by continuing
to offer the most complete line of products available within its markets and
by developing and introducing new products. See "--Products."
BRAND NAME RECOGNITION AND REPUTATION FOR QUALITY PRODUCTS AND SERVICE.
Through its manufacturing expertise and experience, the Company has
established recognition in its markets for the GSI(R), AP(TM) and
Cumberland(R) brand names. The Company seeks to protect the reputation for
high quality, reliability and specialized services that are associated with
such brand names through extensive quality control and customer feedback
programs. The Company believes that its reputation and recognized brand names,
along with its extensive distribution network, will assist it in its efforts
to further penetrate both the domestic and international markets in which the
Company operates.
EFFECTIVE AND ESTABLISHED DISTRIBUTION NETWORK. The Company believes that
its development of a highly effective and established distribution network
affords it significant competitive advantages. The Company's distribution
network consists of over 1,600 independent dealers that market the Company's
products in approximately 75 countries throughout the world. The breadth and
scope of the Company's distribution network makes its products readily
available in each of the Company's markets and lowers transportation costs for
its customers. Dealers are carefully selected and trained to ensure high
levels of customer service. In addition, the Company has experienced a very
low turn-over rate of its dealers since the Company's inception, which
promotes consistency and stability to customers. See "--Product Distribution."
LONG-TERM ALLIANCES WITH CUSTOMERS. The Company has a history of developing
long-term alliances with customers who are market leaders in both the
industries and the geographic markets they serve. The Company works closely
with customers through all stages of product development in order to tailor
products and systems to meet each customer's unique needs, making
substitutions with competitor products more difficult. The Company's
commitment to product quality, dedication to customer service and
responsiveness to changing customer needs have enabled the Company to develop
and strengthen long-term alliances with its customers. The strength of the
Company's customer relationships are demonstrated by the fact that over 45% of
the Company's 1996 domestic net sales derived from grain equipment were made
to customers who have purchased from the Company for at least 10 years. In
addition, the Company has entered into long-term supply agreements with two of
its largest customers, which arrangements the Company believes are unique in
the industry.
FLEXIBLE MANUFACTURING FACILITIES. The Company's facilities are designed to
be easily reconfigured to adapt to demand changes for any or all of the
Company's products. The Company's primary manufacturing facility, located in
Assumption, Illinois, consists of approximately 675,000 square feet and
operates on a 24-hour basis during peak production periods. The Company's
facilities employ state-of-the-art machines that have enhanced
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production efficiency. The Company believes that its current facilities will
accommodate planned production increases as the Company experiences sales
growth and expands into new markets. See "--Facilities."
COMPANY OPERATED AND OWNED BY EXPERIENCED MANAGEMENT TEAM. The Company is
led by an experienced management team, the members of which have each worked
in the agricultural products industry for an average of 16 years. Craig Sloan,
a founder and the Chief Executive Officer of the Company, and each of the
other members of the Company's senior management team have invested in the
Company and together own all of its voting common stock. The Company believes
that the agricultural expertise of its management team, coupled with the
corporate culture promoted by a management-owned company, permit it to
establish strong customer relationships and respond quickly to market
opportunities. See "Management--Executive Officers and Directors" and
"Ownership of Capital Stock."
BUSINESS STRATEGY
The Company's objective is to capitalize on its strengths through the
implementation of its business strategy, which includes the following
principal elements:
CAPITALIZE ON GROWTH OPPORTUNITIES IN INTERNATIONAL MARKETS. International
sales increased from approximately $36.8 million in 1995 to approximately
$55.5 million in 1996, and were approximately $43.5 million in the nine months
ended September 30, 1997. The Company intends to continue to leverage its
worldwide brand name recognition, leading market positions and international
distribution network to capture the significant demand for its products that
exists in the international marketplace. While the Company anticipates that
sales will continue to be generated worldwide, the Company is targeting the
Far East, Latin America and Eastern Europe, where it believes the greatest
potential for significant growth exists. The Company believes that increasing
the diversity of both its customer base and geographic coverage by expanding
its international operations will mitigate the effect of future reductions in
demand within any of its individual product lines, or within a particular
geographic selling region.
ENHANCE GROWTH THROUGH STRATEGIC ACQUISITIONS. The Company will continue to
selectively seek acquisitions with complementary product lines that offer the
opportunity to improve market penetration and profitability through
integration with the Company's existing businesses. The Company believes that
the markets in which it operates include single-product producers who may not
be able to effectively compete against larger integrated producers, such as
the Company, but which might benefit from economies of scale resulting from a
business combination with the Company. The Company recently acquired all of
the capital stock of DMC, a leading manufacturer and supplier of grain drying
and handling equipment, to complement the Company's grain equipment product
line.
CONTINUE DEVELOPMENT OF PROPRIETARY PRODUCT INNOVATIONS. The Company's
research and development efforts focus on the development of new and
technologically advanced products to respond to customer demands, changes in
the marketplace and new technology. The Company employs a strategy of working
closely with its customers and capitalizing on existing technology to improve
existing products and develop new value-added products. The Company believes
that it has an impressive record of new product development as is evidenced by
its improved Easy Access doors and Series 2000 dryers for grain bins, its
Performer Fan(TM) line of products for the swine industry and its patented HI-
LO(R) chicken feeders and Delta Series(TM) turkey feeders. The Company intends
to continue to actively develop product improvements and innovations to more
effectively serve its customers. See "--Products."
CONTINUE PROFITABILITY ENHANCEMENTS. The Company plans to continue to
actively manage its business to improve cash flows by containing costs,
selectively expanding production and improving productivity. The Company's
past success in enhancing profitability is evidenced by an EBITDA margin for
1996 of 9.9% compared to 5.6% for 1995, and an EBITDA margin of 11.1% for the
nine months ended September 30, 1997 compared to 10.3% for the corresponding
period in 1996.
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DMC ACQUISITION
In furtherance of its business strategy, the Company, on November 5, 1997,
acquired all of the capital stock of DMC for approximately $19.3 million in
cash. The Company funded the DMC Acquisition with a portion of the net
proceeds from the Offering. See "Use of Proceeds."
DMC is a leading manufacturer and supplier of grain drying and handling
equipment. DMC manufactures equipment at its headquarters in Mason City, Iowa
and maintains six company-owned distribution facilities in Iowa, Nebraska,
Illinois, Arkansas, Indiana and South Dakota. DMC uses this distribution
network to market products to approximately 1,500 domestic and international
dealers. DMC recorded net sales and operating income of $26.0 million and $3.7
million, respectively, for the eleven months ended September 30, 1997.
Approximately 52% of DMC's net sales during such period were derived from
products manufactured by DMC, with the remaining portion derived from
products, including augers, fans, heaters, floor supports and bucket elevators
and conveyors, that were purchased from manufacturers other than the Company.
International sales comprised approximately 13.5% of DMC's net sales for the
eleven months ended September 30, 1997.
The Company believes that the DMC Acquisition has expanded the breadth of
the Company's grain equipment product line and will increase net sales and
operating income. Because the Company manufactures many of the products sold
but not manufactured by DMC, the Company supplies such products to DMC. The
Company will continue to leverage DMC's distribution network to increase sales
of the Company's swine equipment. In addition, the Company believes it can
increase sales of DMC products through dealers in the Company's distribution
network who currently handle products of competitors of DMC.
INDUSTRY OVERVIEW
Demand for the Company's products is driven by the overall worldwide level
of grain, swine and poultry production as well as the increasing focus both
domestically and internationally on improving productivity in these
industries. These markets are driven by a number of factors, including
consumption trends affected by economic and population growth and government
policies.
Demand for grain and the required infrastructure for grain storage, drying
and handling is driven by several factors, including the need for additional
grain for increased worldwide production of swine, poultry and beef. The
Company believes that less functionally sophisticated and efficient grain
storage facilities located outside the U.S. and Western Europe, which
experience higher levels of grain spoilage and loss, are increasingly likely
to be replaced by more modern equipment. The Company also believes that these
dynamics will continue to support rising domestic and international demand for
the Company's grain storage, drying and handling systems.
Demand for the Company's swine and poultry feeding equipment and feed
storage and delivery systems is positively impacted by the significant
economic and population growth occurring in certain international markets,
including Asia (where average annual gross domestic product growth rates over
the past ten years have been more than triple that of the U.S.), Latin America
and to a lesser extent, Eastern Europe. As a result of increasing disposable
income in these international markets, consumers are devoting larger portions
of their income to improved and higher protein-based diets. This has
stimulated stronger demand for meat, specifically poultry and, to a lesser
extent, pork, as these meats provide more cost-effective sources of animal
protein than beef.
The Company's sales of grain equipment have historically been affected by
feed and grain prices, acreage planted, crop yields, demand, government
policies, government subsidies and other factors beyond the Company's control.
Weather conditions also can adversely impact the agricultural industry and
delay planned construction activity, resulting in fluctuating demand for the
Company's grain equipment and delayed or lost revenues. Increases in feed and
grain prices have in the past resulted in a decline in sales of feeding,
watering and ventilation systems, although these same conditions have tended
to improve sales of grain storage bins. The Company's sales of swine and
poultry equipment historically have been affected by the level of construction
activity by swine and poultry producers, which is affected by feed prices and
domestic and international demand for pork and poultry. See "Risk Factors--
Agricultural Industry; Seasonality."
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GRAIN INDUSTRY
After several years of relatively slow growth, world grain production is
projected to increase more rapidly through 2005 to meet demand for grain
products. Widespread economic and population growth, which increases demand
for animal protein, is driving increased demand for world grain production.
The U.S. Federal Agricultural Improvement and Reform (FAIR) Act of 1996 and
continued crop yield enhancements are expected to permit increased worldwide
grain production to meet this demand. According to the United States
Department of Agriculture (USDA), increasing demand for grain, combined with a
shortage of crops due to poor weather in key growing regions in the last
several years, resulted in a tightening of inventory positions and the lowest
level of U.S. and worldwide grain reserves in recent history. Consequently,
grain prices have risen both in real and nominal terms over the last several
years, while also creating significant pricing volatility and variability
beyond the normal seasonal variations. Higher grain prices have greatly
increased the income and cash reserves of North American grain farmers
providing them with the means to invest in additional farm assets. Commodity
price variations provide incentives for grain producers and users to utilize
on-farm or commercial grain storage capacity to take advantage of favorable
points in the pricing cycle.
PORK INDUSTRY
Although U.S. pork production has experienced slow growth over the past 10
years, a recent trend towards industry consolidation from a large number of
small operators to a smaller number of larger, integrated operators is
creating increased demand for automated production systems including feeding
and ventilation systems. Since 1980, the number of U.S. swine farms has fallen
from over 650,000 to under 200,000. Total U.S. pork production, however, has
increased from 14.0 billion pounds in 1986 to 17.1 billion pounds in 1996, due
in part to greater capital investment in automated systems by larger
operators. The Company believes that this consolidation is likely to further
lower production costs and therefore pork prices, which may have a favorable
impact on per capita pork consumption. Internationally, world pork production
is projected to grow at a rate of 2.8% per year from 1997 to 2000. The primary
growth areas for pork demand are expected to include Asia and Mexico with
growth also anticipated in the countries of the former Soviet Union and
central and eastern Europe. The Company believes that much of the production
is expected to shift from small unconfined manual facilities to more modern
automated, confined facilities, and to large U.S. swine integrators that
establish overseas facilities, resulting in lower production costs and
improved meat quality.
POULTRY INDUSTRY
The U.S. poultry industry has enjoyed steady growth over the past several
decades, with U.S. per capita consumption of poultry increasing from 42.8
pounds in 1975 to 90.1 pounds in 1996, a compound annual growth rate of 3.6%.
U.S. poultry production has grown annually at rates of between 5% and 7% over
the past decade and this trend is expected to continue into the foreseeable
future. World poultry production and consumption have grown at even greater
rates than the U.S. in the last two decades. Industry sources attribute these
increases to a number of factors, including consumers' rising disposable
incomes, population growth, declining relative prices of poultry to other
meats and product innovations such as the proliferation of pre-packaged and
value-added poultry products. Additionally, nutritional and health concerns
among consumers have led to poultry market share increases relative to red
meat due to poultry's relatively low fat, low cholesterol and high protein
content. International growth is projected to exceed the rate experienced in
the U.S. due to the rapid rate of international economic development and the
relatively low market share that poultry holds of the total meat market in a
number of developing countries. As a result of this growth to date and the
inability of a number of developing countries to increase their production
facilities at a like rate, U.S. broiler exports have grown at a compound
annual rate of 25% since 1985, with global poultry trade projected to grow at
approximately 4% annually through 2005. Consequently, the U.S. is now the
world's largest exporter of poultry and is expected to hold this position for
the foreseeable future. Despite steady growth in both domestic and
international poultry production and consumption, competitive pressures have
caused poultry equipment prices to decline and the market for poultry
equipment products has not expanded as rapidly. See "Risk Factors--
Competition."
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PRODUCTS
The Company manufactures and markets (i) grain storage bins and related
drying and handling equipment systems, (ii) swine feed storage, feed delivery,
confinement and ventilation systems and (iii) poultry feed storage, feed
delivery, watering, ventilation, nesting, egg-handling and hatching systems.
The Company offers a broad range of products that permits customers to
purchase their grain, swine and poultry production equipment needs from one
supplier. The Company believes that its ability to offer integrated systems
provides it with a competitive advantage by enabling producers to purchase
complete, integrated production systems from a single distributor who can
offer high-quality installation and service.
GRAIN PRODUCT LINE
The Company's grain equipment consists of the following products:
Grain Storage Bins. The Company manufactures and markets a complete line of
over 1,000 models of both flat and hopper bottomed grain storage bins with
capacities of up to 650,000 bushels. The Company markets its bins to both farm
and commercial end users under its GSI(R) brand name. The Company's grain
storage bins are manufactured using high-yield, high tensile, galvanized steel
and are assembled with high strength, galvanized bolts and anchor brackets.
The Company's grain storage bins offer efficient design enhancements,
including patented walk-in doors and a roof design that provides specialized
vents for increased efficiency, extruded lips for protection against leakage,
large and accessible eave and peak openings for ease of access, and reinforced
supportive bends to increase rigidity. The Company believes that its grain
storage bins are the most reliable and durable in the industry.
Grain Drying Equipment. To meet the need to dry grain for storage, the
Company manufactures and markets a complete line of over 100 models of grain
drying devices with capacities of up to 10,000 bushels per hour. The Company
markets its grain drying equipment to both farm and commercial end users under
its GSI(R) and Airstream(R) brand names. The Company's drying equipment, which
includes fans, heaters, top dryers, portable dryers, stack dryers and tower
dryers, are manufactured using galvanized steel and high-grade electrical
components and utilize patented control systems, which offer computerized
control of all dryer functions from one panel.
Grain Handling Equipment. During 1997, the Company began manufacturing and
marketing a complete line of grain handling equipment to complement its grain
storage and drying product offerings. The Company markets its grain handling
equipment, which includes bucket elevators, conveyors and augers, to both farm
and commercial end users under its GSI(R) brand name. The Company's grain
handling equipment offers ease of integration into Company or competitor
systems and enables the Company to offer a fully-integrated product line to
grain producers.
SWINE PRODUCT LINE
The Company's swine equipment consists of the following products:
Feeding Systems. The Company manufactures and markets its swine feeding
products under its AP(TM) brand name. The Company designs and implements
custom swine feeding systems to fit both the general industry needs of the
different types of swine producers and the specialized needs of individual
swine producers. The Company's swine feeding systems generally consist of a
feed storage bin located outside of the swine building and a feed delivery
system, which conveys the feed to and through the building to drop feed
dispensers suspended within the building. The drop feed dispensers provide
individualized feeding through automatic timers. The Company's swine feed
storage bins are manufactured with precision die-cut, high tensile corrugated
steel and assembled with an exclusive water tight sealing system and specially
die-formed eaves, and include the Auto-Lok(TM) access system, which allows for
efficient systems monitoring. The Company's swine feed delivery systems
consist of the Flex-Flo(TM) System and the Chain Disk System. The Flex-Flo(TM)
System uses high-quality
51
<PAGE>
tensile steel augers and precision control devices to reach all drop feeders
within a system. The Chain Disk System handles high capacities of feed at long
distances with multiple turns. The Company believes that its swine drop
feeders are superior to its competitors' products due to their ease of
installation and maintenance, ability to handle high volumes of feed, accurate
eye-level scales and strong, durable all-plastic construction that eliminates
corrosion.
Ventilation Systems. The Company manufactures and markets ventilation
systems for swine buildings under its AP(TM) and Airstream(R) brand names.
These systems consist of fans, heating and evaporative cooling systems,
winches, inlets and other accessories (including computer based automated
control devices) that regulate temperature and air flow. Proper ventilation
systems are crucial for minimizing the feed-to-meat conversion ratio by
reducing stress caused by extreme temperature fluctuation, allowing for higher
density production and providing optimum swine health through disease
prevention. The Company's swine ventilation systems produce high levels of air
output at low levels of power consumption, adapt to a wide array of specialty
fans and other accessories, operate with little maintenance or cleaning and
provide precision monitoring of environmental control.
Confinement Systems. The Company manufactures and markets confinement
systems for swine buildings under its AP(TM) brand name. These systems consist
of products for building pens, gates, inner dividing walls and flooring
systems, special heating systems for piglets and uniquely designed gestation
stalls. The Company's swine confinement systems are manufactured using high
tensile steel, and utilize advanced robotic welding, shot blasting and
electrostatic spraying techniques to assure a long-lasting finish that is
durable, corrosion resistant and easy to clean. The Company believes its swine
confinement products contain several design ingenuities. Two examples are the
Company's Hog-Hearth System, which provides heat to newborn piglets at lower
energy costs than are otherwise required in more conventional heating methods,
and the Company's plastic swine nursery flooring equipment, which provides
extra comfort for growing piglets and cleaning advantages for swine producers.
POULTRY PRODUCT LINE
The Company's poultry equipment consists of the following products:
Feeding Systems. The Company manufactures and markets its poultry feeding
systems under its Cumberland(R) brand name. The Company manufactures feeding
systems that are custom tailored to both the general industry needs of
different types of poultry producers and to the specialized needs of
individual poultry producers. The Company's poultry feeding systems consist of
a feed storage bin located outside the poultry house, a feed delivery system
that delivers the feed from the feed storage bin into the house and an
internal feed distribution system that delivers feed to the birds. The
Company's poultry feed storage bins contain a number of patented features
designed to maximize capacity, manage the quality of stored feed, prevent rain
and condensation from entering feed storage bins and provide first-in, first-
out material flow, thereby keeping feed fresh to prevent spoilage, and blended
to provide uniform quality rations. The Company's poultry feed delivery
systems use non-corrosive plastic and galvanized steel parts specially
engineered for durability and reliable operations and specialized tubing and
auguring or chain components that allow feed to be conveyed up, down and
around corners. The Company believes that its patented HI-LO(R) pan feeder is
superior to competitor products due to its unique ability to adjust from floor
feeding for young chicks to regulated feed levels for other birds.
Watering Systems. The Company manufactures and markets nipple watering
systems for poultry producers under its Cumberland(R) brand name. The ability
of a bird to obtain water easily and rapidly is an essential factor in
facilitating weight gain. The Company's poultry watering system consists of
pipes that distribute water throughout the house to drinking units supported
by winches, cables and other components. The water is delivered through a
regulator designed to provide differential water pressure according to demand.
The Company's poultry watering systems are distinguished by their toggle
action nipples, which transmit water from
52
<PAGE>
nipple to beak without causing undue stress on the bird or excess water to be
splashed onto the floor. The watering nipples produced by the Company also are
designed to allow large water droplets to form on the cavity of the nipple,
thereby attracting young birds to drink, which ultimately promotes weight
gain.
Ventilation Systems. The Company manufactures and markets ventilation
systems for poultry producers under its Cumberland(R) brand name. Equipment
utilized in such systems include fiberglass and galvanized fans, the Komfort
Kooler evaporative cooling systems, manual and automated curtain coolers,
heating systems and automated controls for complete ventilation, cooling and
heating management. The Company believes its poultry ventilation products are
reliable and easy to assemble in the field, permit energy-efficient airflow
management and are well-suited for international sales because they ship
compactly and inexpensively and assemble with little hardware and few tools.
Nesting and Egg-Handling Systems. The Company manufactures and markets
nesting and egg-handling systems for poultry producers under its Cumberland(R)
brand name. These systems consist of mechanical nests and egg collection
tables. The Company's nesting and egg-handling systems are manufactured using
high-yield, high tensile galvanized steel and are designed to promote comfort
for nesting birds and efficiency for production personnel. The Company
believes that its nesting and egg-handling systems are among the most reliable
and cost-effective in the poultry industry.
Hatching Systems. The Company manufactures and markets commercial incubation
systems for the poultry industry, with capacities of up to 115,200 eggs, under
its Cumberland(R) brand name. The Company provides incubation systems for
producers that grow each of the following types of poultry: breeders (chickens
grown to lay eggs); broilers (chickens grown for human consumption); and
turkeys. The Company believes that its incubation products are distinguished
by their efficient use of space, reliable control panels, effective airflow
mechanisms, versatility and durability, ease of access and sophistication of
tracking devices. The Company's Visionlink(TM) product allows incubators to be
managed from a personal computer, while its Tracer(TM) product facilitates
effective bar code tracing from the point of breeding to the point of
delivery.
In 1996, 1995 and 1994, no single class of the Company's products accounted
for 10% or more of the Company's net sales.
PRODUCT DISTRIBUTION
The Company distributes its products primarily through a network of over
1,600 U.S. and international independent dealers who offer targeted geographic
coverage in key grain, swine and poultry producing markets throughout the
world. The Company's dealers sell products to grain, swine and poultry
producers, agricultural companies and various other farm and commercial end-
users. The Company believes that its distribution network is one of the
strongest in the industry, providing its customers with high levels of
service. Since its inception, the Company has experienced a very low turn-over
rate of its dealers. The Company believes this has resulted in a reputation of
consistency in its products and stability with its customers. The Company
further believes that the high-level of commitment its dealers have to the
Company is evidenced by the fact that many of the Company's dealers choose not
to sell products of the Company's competitors.
The Company also maintains a sales force consisting of approximately 75
professionals. In addition to providing oversight services of the Company's
distribution network, the sales force interacts with integrators and end
users, recruits additional dealers for the Company's products, and educates
the dealers on the uses and functions of the Company's products. The Company
further supports and markets its products with a 27 person technical service
and support team, which provides training and advice to dealers and end users
regarding installation, operation and service of products and, when necessary,
on-site service.
In 1996 no individual dealer or other customer represented more than 10% of
the Company's net sales.
DOMESTIC DISTRIBUTION AND CUSTOMERS
The Company sells its products in the U.S. through a network of over 1,350
independent dealers who market, sell and, in many cases, install the Company's
products and provide post-sale technical support and service. Most of the
Company's domestic sales are made to dealers who market the Company's products
to
53
<PAGE>
grain, swine and poultry end-users. The Company also makes direct sales of its
products to end-users, such as large commercial grain producers or swine or
poultry "turn-key" contractors. The Company's domestic dealers generally cover
certain geographic areas but are not restricted from competing in other
geographic markets.
INTERNATIONAL DISTRIBUTION AND CUSTOMERS
The Company has more than 250 independent international dealers that market
the Company's products in approximately 75 countries outside of the U.S. The
Company prefers to sell its products to local dealers, while maintaining the
right to make direct sales to key international customers. When direct sales
are made the Company provides engineering and construction management support.
The Company's international dealers generally represent specific geographic
areas and are responsible for the development of their respective markets and
dealer networks. While the Company anticipates that sales will continue to be
generated worldwide, the Company is targeting the Far East, Latin America and
Eastern Europe, where it believes the greatest potential for significant
growth exists.
The percentage of net sales generated by the Company by market region in
1994, 1995 and 1996 were as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
United States........................................ 79.8% 73.9% 68.9%
Asia................................................. 4.5 11.5 10.5
Canada............................................... 7.2 4.0 7.4
Latin America........................................ 5.5 5.3 5.7
Mideast.............................................. 1.4 1.9 5.7
Europe............................................... 1.3 1.4 1.4
All other............................................ 0.3 2.0 0.4
----- ----- -----
Total............................................ 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
COMPETITION
The market for the Company's products is competitive. Domestically and
internationally, the Company competes with a variety of manufacturers and
suppliers that offer only a limited number of the products offered by the
Company. The Company believes that only one of its competitors, CTB
International Corp., offers products across most of the Company's product
lines. See "Risk Factors--Competition."
Competition is based on the price, value, reputation, quality and design of
the products offered and the customer service provided by distributors,
dealers and manufacturers of the products. The Company believes that its
leading brand names, diversified product lines, strong distribution network
and high quality products enable it to compete effectively. The Company
further believes that its ability to offer integrated systems to grain, swine
and poultry producers, which significantly lowers total production costs and
enhances producer productivity, provides it with a competitive advantage.
Integrated equipment systems offer significant benefits to dealers, including
lower administrative and shipping costs and the ease of dealing with a single
supplier for all of their customer needs. In addition, the Company's dealers
provide producers with high quality service, installation and repair.
NEW PRODUCT DEVELOPMENT
The Company has a product development and design engineering staff of
approximately 45 people, most of whom are located in Assumption, Illinois.
Expenditures by the Company for product research and development amounted to
approximately $1.3 million, $1.4 million and $1.1 million for the years ended
December 31, 1996, 1995 and 1994, respectively. The Company charges research
and development costs to operations as incurred. The Company anticipates
product research and development spending to continue at historic levels for
the foreseeable future.
54
<PAGE>
RAW MATERIALS
The primary raw materials used by the Company to manufacture its products
are steel and polymer materials, including PVC pipe, polypropylene and
polyethylene. The Company also purchases various component parts that are
integrated into the Company's products. The Company is not dependent on any
one of its suppliers and in the past has not experienced difficulty in
obtaining materials or components. In addition, materials and components
purchased by the Company are readily available from alternative suppliers. The
Company has no long-term supply contracts for materials or components. See
"Risk Factors--Raw Materials Price Volatility."
REGULATORY AND ENVIRONMENTAL MATTERS
Like other manufacturers, the Company is subject to a broad range of
federal, state, local and foreign laws and requirements, including those
governing discharges to the air and water, the handling and disposal of solid
and hazardous substances and wastes, the remediation of contamination
associated with releases of hazardous substances at the Company's facilities
and offsite disposal locations, workplace safety and equal employment
opportunities. Expenditures made by the Company to comply with such laws and
requirements historically have not been material. See "Risk Factors--
Regulatory and Environmental Matters."
FACILITIES
The following table sets forth information regarding the principal
properties of the Company:
<TABLE>
<CAPTION>
LOCATION OPERATIONS SQUARE FEET LEASED/OWNED(2)
-------- ---------- ----------- ---------------
<S> <C> <C> <C>
Assumption,
Illinois Headquarters/Manufacturing/Sales Office 675,000 Owned
Paris, Illi-
nois
Main Plant Manufacturing 97,320 Owned
Colson Plant Assembly 80,000 Owned
Airport
Plant Manufacturing 38,000 Leased
Newton, Illi-
nois Manufacturing 126,000 Owned
Mt. Olive,
North Caro-
lina(1) Assembly 84,000 Owned
Vandalia, Il-
linois Assembly 67,500 Owned
Nova Odessa,
Brazil Manufacturing/Sales Office/Warehouse 50,000 Leased
Mt. Carmel,
Illinois Assembly 48,000 Leased
Geneva, Indi-
ana Sales Office/Warehouse 41,760 Leased
Penang, Ma-
laysia Manufacturing/Sales Office/Warehouse 36,000 Leased
Fourways,
South Africa Sales Office/Warehouse 20,000 Leased
Sioux City,
Iowa Sales Office/Warehouse 20,000 Leased
Warsaw, North
Carolina Sales Office/Warehouse 19,400 Owned
Lenni, Penn-
sylvania Assembly 10,000 Leased
Sambeek, The
Netherlands Sales Office/Warehouse 8,000 Leased
Nogales, Mex-
ico Sales Office/Warehouse 1,000 Leased
</TABLE>
- --------
(1) Immediately following the consummation of the Offering, the Company used a
portion of the net proceeds from the Offering to purchase this facility
from Carolina Agri-Systems, Inc. for approximately $1.3 million. See "Use
of Proceeds" and "Certain Relationships and Related Transactions--
Transactions with Carolina Agri-Systems, Inc. and FarmPRO, Inc."
(2) Upon consummation of the Exchange Offer, the Company's owned facilities
will remain subject to mortgages. The Company's leased facilities are
subject to various leases that expire between April 1, 1998 and July 1,
2000.
The Company believes that its facilities are suitable for their present and
intended purposes and have adequate capacity for the Company's current levels
of operation.
55
<PAGE>
BACKLOG
Backlog is not a significant factor in the Company's business because most
of the Company's products are delivered within a few weeks of their order. The
Company's backlog at September 30, 1997 was $26.0 million compared to $20.3
million at September 30, 1996. The Company believes that all such backlog will
be filled by the end of 1997.
PATENTS AND TRADEMARKS
The Company protects its technological and proprietary developments. The
Company currently has 21 active U.S. patents and 18 U.S. trademarks. The
Company has been granted a license from Petersime NV, a Belgium Corporation,
for technical information and know-how in developing and manufacturing
incubators for poultry. See "Business--Products--Poultry Product Line--
Hatching Systems." While the Company believes its patents, trademarks and
licensed information have significant value, the Company does not believe that
its competitive position or that its operations are dependent on any
individual patent or trademark or group of related patents or trademarks.
PRODUCT LIABILITY AND LEGAL PROCEEDINGS
From time to time, the Company is involved in various litigation matters
involving ordinary and routine claims incidental to the Company's business.
Products sold by the Company may expose it to potential liabilities for
personal injury or property damage claims relating to the use of such
products. The Company maintains third-party product liability insurance which
it believes to be adequate. To date the aggregate costs to the Company for
claims, including product liability actions, have not been material. See "Risk
Factors--Product Liability Risk."
There are no legal proceedings pending against the Company which, in the
opinion of management, would have a material adverse effect on the Company's
business, financial position or results of operations.
EMPLOYEES
As of September 30, 1997, the Company had approximately 1,455 employees, of
which 1,124 were permanent and 331 were seasonal. None of the Company's
employees are represented by a union. Management believes that its
relationships with the Company's employees are good.
In July 1996, certain employees of the Company were granted individual
amounts of "gainshares" based on several factors, including experience and
responsibilities. This program, which terminates December 31, 1997, provides
for participating employees to receive 40% of the Company's pre-tax profits
that are in excess of 5% of the Company's net sales. Each participating
employee's portion is calculated based on the number of shares held. Total
expenses to the Company under this plan in 1996 were $2.3 million.
56
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's bylaws provide that the number of directors shall be four.
Each director is elected to serve until the next annual meeting and until his
or her successor has been elected and qualified or until his or her earlier
resignation or removal. Executive officers are elected by the Board of
Directors and serve until their successors have been elected and qualified or
until their earlier resignation or removal.
The following table sets forth certain information concerning the executive
officers and directors of the Company as of September 30, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Craig Sloan............. 47 Chief Executive Officer and Director
Jorge Andrade........... 46 President, Chief Operating Officer and Director
John W. Funk............ 37 Executive Vice President, Chief Financial Officer,
General Counsel, Secretary and Director
Howard G. Buffett....... 42 Chairman of the Board of Directors
Eugene A. Wiseman....... 48 President of GSI Division
David L. Vettel......... 39 President of GSI International Division
Allen A. Deutsch........ 46 President of AP Division
Christopher V. van 42 President of GSI/Cumberland International and
Rossem................. Cumberland Hatchery Systems Divisions
Charles L. Jordan....... 41 President of Cumberland Division
Russell C. Mello........ 36 Vice President, Finance, Assistant Secretary and
Assistant Treasurer
Mark S. Waters.......... 48 Vice President, International Operations
</TABLE>
CRAIG SLOAN joined the Company in November 1971. Mr. Sloan has been Chief
Executive Officer since December 1993. From December 1974 to December 1993, he
served as President of Grain Systems, Inc., a former subsidiary of the
Company. Mr. Sloan has been a Director of the Company since December 1972.
JORGE ANDRADE joined the Company in April 1993. Mr. Andrade has been Chief
Operating Officer since January 1995. Mr. Andrade also has been President
since April 1996. From April 1993 to December 1994, he served as President of
the Cumberland Division. From March 1987 to March 1993, he served as Executive
Vice President of Chick Master Incubator Company, an international
manufacturer of high-capacity incubators for poultry. Mr. Andrade has been a
Director of the Company since April 1996.
JOHN W. FUNK joined the Company in December 1995 and has been General
Counsel since that time. Mr. Funk also has been Executive Vice President,
Chief Financial Officer and Secretary since April 1996. From May 1994 to
December 1995, he served as Chief Operating Officer of Behnke & Company, Inc.,
a commercial insurance agency. From October 1988 to January 1994, he served as
In-House Counsel to A.E. Staley Manufacturing Company, a grain processing
company. From September 1985 to October 1988, he was an associate at the New
York law firm of Brown & Wood. Mr. Funk has been a Director of the Company
since April 1996.
HOWARD G. BUFFETT joined the Company in September 1995. Mr. Buffett has been
Chairman of the Board since June 1996. From September 1995 to June 1996, he
served as President of International Operations. From February 1992 to July
1995, he served as Corporate Vice President and Assistant to the Chairman of
the Archer-Daniels-Midland Company, a processor of agricultural products. Mr.
Buffett has been a Director of the Company since September 1995. Mr. Buffett
also is a Director of Berkshire Hathaway, Inc., Coca-Cola Enterprises, Inc.,
Lindsay Manufacturing Company and Vision Solutions, Inc.
57
<PAGE>
EUGENE A. WISEMAN joined the Company in October 1978. Mr. Wiseman has been
President of the GSI Division since December 1996. From December 1994 to
December 1996, he served as Vice President of the GSI Division. From March
1990 to December 1994, he served as Division Manager of the GSI Division.
Prior thereto, Mr. Wiseman held various sales and management positions.
DAVID L. VETTEL joined the Company in November 1993. Mr. Vettel has been
President of the GSI International Division since December 1995. From November
1993 to December 1995, he served as Vice President of the GSI International
Division. From November 1991 to November 1993, he served as International
Sales Manager of Chief Industries, Inc., a manufacturer of steel buildings and
grain storage bins.
ALLEN A. DEUTSCH joined the Company in January 1993. Mr. Deutsch has been
President of the AP Division since June 1996. From April 1995 to June 1996, he
served as Vice President of the AP Division. From January 1993 to April 1995,
he served as National Sales Manager of the AP Division. From August 1983 to
January 1993, he served as Sales Manager of AAA Associates, Incorporated, a
manufacturer and marketer of livestock ventilation systems, which business was
acquired by the Company in January 1993.
CHRISTOPHER V. VAN ROSSEM joined the Company in October 1993 and has been
President of the GSI/Cumberland International Division since that time. Mr.
van Rossem also has been President of the Cumberland Hatchery Systems Division
since August 1997. From June 1989 to October 1993, he served as Sales Manager
of Chick Master Incubator Co., an international manufacturer of high-capacity
incubators for poultry, where he managed the company's United States and
Canadian sales departments.
CHARLES L. JORDAN joined the Company in May 1975. Mr. Jordan has been
President of the Cumberland Division since March 1996. From May 1989 to March
1996, Mr. Jordan held various sales and operation management positions with
the Cumberland Division. Prior thereto, Mr. Jordan held various regional
management positions.
RUSSELL C. MELLO joined the Company in March 1995. Mr. Mello has been Vice
President, Finance and Assistant Secretary and Assistant Treasurer since
September 1996. From March 1995 to September 1996, he served as the Controller
of the GSI Division. From December 1993 to March 1995, he served as Manager of
Business Planning of Emerson Hermetic Motor Division, a division of Emerson
Electric Company, a manufacturer of commercial and industrial motors. From
March 1990 to December 1993, he served as Controller of Copeland Electric,
Inc., a subsidiary of Emerson Electric Company.
MARK S. WATERS joined the Company in September 1997 as Vice President,
International Operations. From January 1995 to September 1997, he served as
Controller, Latin America of Federal-Mogul Corporation, a manufacturer and
distributor of automotive parts. From January 1992 to December 1995, he served
as International Accounting Manager of Federal-Mogul Corporation. Mr. Waters
is a certified public accountant.
Messrs. Sloan, Andrade, Funk and Buffett serve as members of the Company's
Board of Directors pursuant to a voting agreement. See "Certain Relationships
and Related Transactions--Management Buyout--Stockholder Agreements."
58
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth in summary form all compensation for all
services rendered in all capacities to the Company for the year ended December
31, 1996 of the Company's Chief Executive Officer and the other four most
highly compensated executive officers of the Company (the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------- ALL OTHER
SALARY BONUS COMPENSATION
NAME & PRINCIPAL POSITION YEAR $ $ $
------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Craig Sloan................................ 1997 $ $ $
Chief Executive Officer and Director
Jorge Andrade.............................. 1997 $ $ $
President, Chief Operating Officer and
Director
John W. Funk............................... 1997 $ $ $
Chief Financial Officer, General Counsel,
Secretary and Director
Howard G. Buffett.......................... 1997 $ $ $
Chairman of the Board
David L. Vettel............................ 1997 $ $ $
President of International Division
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Sloan,
Andrade, Funk and Buffett (each, an "Executive"). The terms of each
Executive's employment agreement are substantially the same. Each agreement
provides for a specified minimum annual base salary, subject to increases
determined by the Company's Board of Directors, and participation in any
profit sharing, retirement, insurance or other benefit plans maintained by the
Company.
The employment agreement of each Executive will terminate as of the earliest
of: (i) June 6, 2001; (ii) the last day of the month in which the Executive's
death occurs; or (iii) ninety days after the date the Company gives the
Executive notice of termination if such termination is for "cause" or due to
the Executive being "permanently disabled" (as such terms are defined in the
employment agreement). The Company may not terminate an Executive, with or
without cause, unless such termination has been authorized by a resolution
adopted by the Board at a meeting duly called and held, and where the
Executive is given prior written notice of the basis for his termination and
an opportunity to be heard by the Board at such meeting. In addition, the
Executive may not be terminated for cause unless: (i) the Company has followed
the foregoing procedures and (ii) the Executive is given an opportunity to
cure any of the actions or omissions which form the basis for his termination
within 30 days of the adoption of the Board resolution described above. If
employment is terminated due to permanent disability, the Executive will
continue to receive an annual salary (less any benefits paid during the period
of his disability under the Company's disability insurance programs) and other
benefits until such time that the Executive sells his stock to the Company
pursuant to the terms of certain stockholder agreements among the holders of
the Company's voting stock. See "Certain Relationships and Related
Transactions--Management Buyout--Stockholder Agreements." If employment is
terminated without cause after December 6, 1999, the Executive will receive,
immediately upon such termination, a severance payment based on his 1996
salary.
Each employment agreement also provides that during the Executive's
employment with the Company, and for two years thereafter, the Executive will
not be employed by or otherwise engage in any business that is in competition
with the Company, except that the Executive may: (i) invest in such a business
where the stock of such business is traded on a national securities exchange
and the Executive owns less than 1% of the equity of
59
<PAGE>
such business; (ii) serve on the board of directors of any corporation on
which the Executive is serving as of the date of his termination; and (iii)
invest in any business in which the Executive has an investment as of the date
of his termination. If the Executive is terminated by the Company without
cause, the foregoing covenant not to compete is null and void.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee during 1996. All members
of the Company's Board of Directors participated in deliberations regarding
executive officer compensation during 1996. See "Certain Relationships and
Related Transactions." During 1996, no member of the Company's Board of
Directors served as a director or a member of the compensation committee of
any other company of which any executive officer served as a member of the
Company's Board of Directors.
DIRECTOR COMPENSATION
Each director of the Company will receive an annual fee of $10,000 plus a
fee or $5,000 for each Board of Directors meeting attended, with such
attendance fees being capped at $40,000, in the aggregate, per year.
OWNERSHIP OF CAPITAL STOCK
The following table sets forth certain information as of September 30, 1997
with respect to the shares of the Company's voting common stock and non-voting
common stock beneficially owned by (i) each person or group that is known by
the Company to beneficially own more than 5% of the outstanding common stock,
(ii) each director of the Company, (iii) the Named Executives and (iv) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NON-VOTING
VOTING COMMON STOCK COMMON STOCK (2)
-------------------- ------------------
NUMBER PERCENTAGE
NUMBER OF PERCENTAGE OF OF NON-
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF VOTING SHARES VOTING
------------------------------------ --------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Craig Sloan (1)........................ 1,175,000 65.28% 26,497 13.25%
Jorge Andrade (1)...................... 300,000 16.67% -- --
John W. Funk (1)....................... 225,000 12.50% -- --
Howard G. Buffett (1).................. 100,000 5.55% -- --
David L. Vettel (1).................... -- -- 15,773 7.89%
Directors and executive officers as a
group (11 persons in group)........... 1,800,000 100.00% 117,192 58.60%
</TABLE>
- --------
(1) The address of each stockholder is c/o The GSI Group, Inc., 1004 East
Illinois Street, Assumption, Illinois 62510, (217) 226-4421.
(2) The Company has 200,000 shares of non-voting common stock outstanding.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT BUYOUT
Prior to June 1996, the Company was owned by Larry Sloan, an uncle of Craig
Sloan, and by Craig Sloan, Tom Sloan and Jim Sloan, all of whom are brothers.
In June 1996, Craig Sloan and three other executives of the Company acquired
all of the Company's voting stock (the "Management Buyout"). The Management
Buyout generally consisted of a redemption by the Company of certain shares of
its voting stock and a subsequent purchase of shares by certain executives of
the Company. In connection with the Management Buyout, the new owners of the
Company's stock also entered into certain stock restriction and buy-sell
agreements. The various components of the Management Buyout are described in
more detail in the sections that follow.
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REDEMPTION AGREEMENTS
In May 1996, the Company entered into Stock Redemption Agreements with Larry
Sloan, Tom Sloan and Jim Sloan (the "Selling Stockholders") pursuant to which
the Company agreed to redeem all the Selling Stockholders' capital stock (the
"Redemption"). The aggregate purchase price paid by the Company for stock
purchased in the Redemption was $25,490,444, which consisted of payments of
$15,600,000, $5,264,357 and $4,626,087 to Larry Sloan, Tom Sloan and Jim
Sloan, respectively. The purchase price consisted of (i) notes (the
"Stockholder Notes") totaling $17,490,444 issued by the Company to Larry
Sloan, Tom Sloan and Jim Sloan in amounts of $10,600,000, $2,264,357 and
$4,626,087, respectively, and (ii) cash totaling $8,000,000, which consisted
of payments to Larry Sloan and Tom Sloan of $5,000,000 and $3,000,000,
respectively. The Stockholder Notes, which bear interest at 8% and mature on
either May 1, 2002 or May 1, 2006, will be repaid at a discount with a portion
of the net proceeds to the Company from the Offering. See "Use of Proceeds."
Immediately following the Redemption, Craig Sloan became the sole stockholder
of the Company, owning 1,125,000 shares of voting common stock and 200,000
shares of newly issued non-voting common stock.
STOCK PURCHASE AGREEMENTS
In June 1996, the Company entered into Stock Purchase Agreements with Craig
Sloan, the Company's Chief Executive Officer, Jorge Andrade, the Company's
Chief Operating Officer, John W. Funk, the Company's Chief Financial Officer,
General Counsel and Secretary, and Howard G. Buffett, the Company's Chairman
of the Board, pursuant to which such individuals purchased from the Company an
aggregate of 675,000 shares of the Company's voting stock for a total cash
purchase price of $2,250,000. Pursuant to such Stock Purchase Agreements,
Jorge Andrade purchased 300,000 shares for $1,000,000, John W. Funk purchased
225,000 shares for $750,000, Howard G. Buffett purchased 100,000 shares for
$333,333, and Craig Sloan purchased 50,000 shares for $166,667. Upon
completion of such purchases, Craig Sloan, Jorge Andrade, John W. Funk and
Howard G. Buffett (collectively the "New Stockholders") owned 100% of the
Company's capital stock.
STOCK PLEDGE, SUBORDINATION AND GUARANTEE AGREEMENTS
To fund a portion of the $8,000,000 in cash payments made in connection with
the Redemption by the Company to Larry Sloan and Tom Sloan, the Company
obtained a $4,000,000 term loan (the "Loan") from the Bank. In order to (i)
induce the Bank to make the Loan, (ii) encourage the Selling Stockholders to
sell their stock in the Redemption and (iii) obtain necessary consents for the
Redemption from various other creditors of the Company, the Selling
Stockholders, the Company, the Bank, the New Stockholders and various other
creditors of the Company entered into various Stock Pledge Agreements,
Subordination Agreements and Guarantees under which (i) the New Stockholders
pledged all their stock (the "Collateral") to the Bank to secure the Company's
obligations under the Loan, (ii) the New Stockholders pledged an applicable
percentage of the Collateral to each of the Selling Stockholders to secure the
Company's obligations under each of the Stockholder Notes, (iii) the Selling
Stockholders agreed to subordinate their rights to their proportionate shares
in the Collateral to the Bank's rights in the Collateral and (iv) the Selling
Stockholders agreed to subordinate their rights to payments under the
Stockholder Notes to both the rights of the Bank to payments under the Loan
and to the rights of various other creditors to payments from the Company
under certain other credit facilities. Upon consummation of the Offering and
application of the net proceeds therefrom, the pledges of Collateral by the
New Stockholders to the Bank and the Selling Stockholders terminated. See "Use
of Proceeds."
In connection with the Redemption, each of Craig Sloan, Jorge Andrade and
John Funk also (i) made personal guarantees of certain obligations of the
Company to various creditors and (ii) entered into Indemnification and
Guarantee Agreements with each of the Selling Stockholders whereby such
individuals agreed to indemnify each of the Selling Stockholders for losses
arising from guarantees made by the Selling Stockholders of certain
obligations of the Company and its affiliates to certain creditors of the
Company and its affiliates that did not release the Selling Stockholders from
their obligations under such guarantees.
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<PAGE>
STOCKHOLDER AGREEMENTS
In connection with the Management Buyout, the Company and the New
Stockholders entered into a Stock Restriction and Buy-Sell Agreement and the
New Stockholders entered into a Stock Restriction and Cross Purchase Agreement
(the "Stockholder Agreements"). The Stockholder Agreements define the rights
of the New Stockholders with respect to their ownership of the Company's
shares. These agreements generally (i) provide that the holders of a majority
of the stock may sell all of their shares at any time if the other New
Stockholders are entitled to participate in such sale on the same terms and
conditions, and that the holders of a majority of the stock may require the
other New Stockholders to sell all their stock at the same time on the same
terms and conditions, (ii) establish that the New Stockholders are restricted
in their ability to sell, pledge or transfer such shares, (iii) grant rights
of first refusal, first to the Company and then to all non-transferring
stockholders, with respect to the transfer of any shares, (iv) require that an
affirmative vote by a majority of the Company's voting stock is required to
approve certain corporate matters and (v) establish procedures for the
purchase of shares by the Company (subject to compliance with the terms of the
Indenture) or any remaining New Stockholders upon the death, permanent
disability or termination of employment of any New Stockholder. Each of the
New Stockholders is covered by life insurance policies, the proceeds of which
generally will be used to fund the purchase of shares from the estate of a
deceased New Stockholder. The Stockholder Agreements also (i) provide that the
holders of a majority of the Company's shares may cause the Company to
register their shares in an underwritten public offering and (ii) grant piggy-
back registration rights to the New Shareholders in the event of an
underwritten public offering.
In addition, the Company, the New Stockholders and each of the holders of
the Company's non-voting common stock have entered into an agreement that (i)
provides that the holders of non-voting common stock are entitled to sell
their shares on the same terms and conditions in the event the New
Stockholders transfer a majority of the voting stock, (ii) provides that the
holders of the non-voting common stock must under certain circumstances agree
to sell their shares on the terms and conditions approved by the Company's
Board of Directors, (iii) establishes that the holders of the non-voting
common stock are restricted in their ability to sell, pledge or transfer such
shares, (iv) grants rights of first refusal, first to Mr. Sloan and then to
the other New Stockholders, with respect to the transfer of any non-voting
common stock to other non-voting stockholders and (v) establishes procedures
for the purchase of shares by Mr. Sloan, the other New Stockholders and the
Company (subject to compliance with the terms of the Indenture) upon the
death, permanent disability or termination of employment of any holder of non-
voting common stock. The agreement also grants piggy-back registration rights
to the holders of non-voting common stock in the event of an underwritten
public offering.
TRANSACTIONS WITH CAROLINA AGRI-SYSTEMS, INC. AND FARMPRO, INC.
In March 1993, certain members of the Sloan family acquired Carolina Agri-
Systems, Inc. ("CASI"), a North Carolina corporation that sold various
products to swine contractors and growers. Larry Sloan owns 50% of the capital
stock of CASI, while Craig Sloan, Jim Sloan and Tom Sloan each own
approximately 16.7% of the capital stock of CASI. In 1995, CASI ceased
distribution operations and the Company wrote-off a $3.4 million receivable
from CASI. Prior to the consummation of the Offering the Company leased two
facilities that were owned by CASI. The first lease (the "Mt. Olive Lease")
was for a facility located in Mt. Olive, North Carolina (the "Mt. Olive
Facility"), which the Company uses for the assembly of hatchery equipment. The
Company made payments to CASI under the Mt. Olive Lease of $138,600 during the
nine months ended September 30, 1997, and of $184,800 during 1996. The other
lease of property owned by CASI (the "Warsaw Lease") was for property located
in Warsaw, North Carolina (the "Warsaw Facility"), which the Company uses as a
sales office and warehouse facility for the sale of swine equipment. The
Company made payments to CASI under the Warsaw Lease of $14,400 during the
nine months ended September 30, 1997, and of $19,200 during 1996. On November
5, 1997, and November 10, 1997, the Company purchased the Mt. Olive Facility
and the Warsaw Facility from CASI for $1,348,203 and $183,928, respectively.
The Company also has made sales in the ordinary course of business of swine
and poultry equipment to CASI. Sales by the Company to CASI were approximately
$0.1 million, $6.0 million and $7.9 million for 1996, 1995 and 1994,
respectively.
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<PAGE>
FarmPRO, Inc. ("FarmPRO"), a Pennsylvania corporation that sells swine
equipment, is a significant customer of the Company. FarmPRO, formerly a
wholly owned subsidiary of CASI, was sold by CASI to certain management
members of FarmPRO at the end of 1995. Concurrently with such sale, the
Company and FarmPRO entered into a long-term supply agreement pursuant to
which FarmPRO agreed to purchase 90% of its equipment requirements from the
Company. On November 28, 1997, the Company became a guarantor of FarmPRO's
$5.1 million bank credit facility. Sales by the Company to FarmPRO were
approximately $12.2 million for the nine months ended September 30, 1997, and
$12.8 million, $8.9 million and $5.3 million for 1996, 1995 and 1994,
respectively.
OTHER RELATED PARTY TRANSACTIONS
The Company makes sales in the ordinary course of business to Sloan
Implement Company, Inc., a supplier of agricultural equipment that is owned by
certain family members of Craig Sloan. Such transactions generally consist of
sales of grain equipment and amounted to $163,987 for the nine months ended
September 30, 1997, and $129,009, $315,938 and $580,855 for 1996, 1995 and
1994, respectively. In June 1996, Sloan Implement Company, Inc. repaid a note
to the Company in the amount of $1.8 million that was incurred in connection
with certain corporate restructuring activities between the two previously
affiliated entities.
The Company has made payments to Sloan Transport, Inc., a company formerly
owned by Craig Sloan and certain other Sloan family members, for the use of a
private plane. Such payments were in the amounts of $76,854, $152,880 and
$220,040 for the years 1996, 1995 and 1994, respectively. In 1996, Sloan
Transport Inc. sold all of its assets and was dissolved.
From time to time the Company extends demand loans to its officers and
directors for the payment of taxes incurred as a result of the Company's
Subchapter "S" status. The annual interest rate on such loans is based on the
prime rate, and has fluctuated between 8.75% and 8.25% during the last three
years. The amount outstanding under such loans for Craig Sloan, Jorge Andrade,
John W. Funk and Howard G. Buffett at September 30, 1997 was $590,300,
$256,395, $193,950 and $87,057, respectively, and the largest amount
outstanding for each individual during 1996 was $518,745, $29,431, $23,423 and
$9,979, respectively. The Company also extended similar loans to Larry Sloan,
Tom Sloan and Jim Sloan, which were repaid in connection with the Redemption.
The largest amounts outstanding under such loans during 1996 were $505,255,
$65,916 and $348,081, during 1995 were $579,058, $43,485 and $418,148, and
during 1994 were $541,132, $40,800 and $278,565, for Larry Sloan, Tom Sloan
and Jim Sloan, respectively. During 1995 and 1994, Craig Sloan advanced loans
to the Company for general corporate purposes. These loans, which bore
interest at the prime rate, were repaid in full during 1996. The largest
amount outstanding under such notes during 1995 and 1994 was $393,803 and
$350,409, respectively.
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<PAGE>
DESCRIPTION OF THE NEW CREDIT AGREEMENT
Concurrently with the consummation of the Offering, the Company entered into
an Amended and Restated Credit Agreement (the "New Credit Agreement") with the
Bank, which amended the Bank Credit Facility. The New Credit Agreement
provides for a revolving credit and letter of credit facility of $40,000,000
terminating in November 2000. The New Credit Agreement bears interest at a
floating rate per annum equal to (at the Company's option): (i) 0.55% to 1.45%
over LIBOR based on the Company's total debt to EBITDA ratio or (ii) the
Bank's prime rate as in effect from time to time. The New Credit Agreement is
available for working capital and general corporate purposes. The Company is
required under the New Credit Agreement to pay the Bank a facility fee on a
quarterly basis. The obligations of the Company under the New Credit Agreement
are secured by a security interest in substantially all of the assets and
properties of the Company.
The New Credit Agreement contains a number of covenants that, among other
things, restricts the ability of the Company to dispose of assets, incur
additional indebtedness, pay dividends or make distributions, create liens on
assets, enter into sale and leaseback transactions, make investments, loans or
advances, make acquisitions, engage in mergers or consolidations, issue
capital stock and form subsidiaries and otherwise restrict certain corporate
activities. In addition, the Company is required to comply with specified
financial ratios and tests.
The New Credit Agreement contains various events of default, including
defaults relating to payments, breaches of representations, warranties and
covenants, certain events of bankruptcy and insolvency, defaults on certain
other indebtedness, certain liens and encumbrances on assets, certain events
terminating employee benefit plans and certain changes of control of the
Company.
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<PAGE>
DESCRIPTION OF THE NEW NOTES
The Old Notes were issued and the New Notes will be issued under an
Indenture dated as of November 1, 1997 (the "Indenture") between the Company
and LaSalle National Bank, as trustee (the "Trustee"), in a private
transaction that is not subject to the registration requirements of the
Securities Act. For purposes of this summary, references to the "Company" mean
only The GSI Group, Inc. and not any of its subsidiaries. References to the
Notes include the New Notes and the Old Notes unless the context otherwise
requires.
Upon the effectiveness of the Registration Statement of which this
Prospectus forms a part, the Indenture will be subject to and governed by the
Trust Indenture Act. The following summaries of the material provisions of the
Indenture do not purport to be complete, and where reference is made to
particular provisions of the Indenture, such provisions, including the
definitions of certain terms, are qualified in their entirety by reference to
all of the provisions of the Indenture and those terms made a part of the
Indenture by reference to the Trust Indenture Act. A copy of the Indenture is
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part, and is incorporated by reference herein. For definitions of
certain capitalized terms used in the following summary, see "--Certain
Definitions" or "Exchange Offer; Registration Rights."
GENERAL
The New Notes will be unsecured senior subordinated obligations of the
Company limited to $100,000,000 aggregate principal amount. The New Notes will
be issued solely in exchange for an equal principal amount of outstanding Old
Notes pursuant to the Exchange Offer. The form and terms of the New Notes will
be identical in all material respects to the form and terms of the Old Notes,
except that (i) the New Notes have been registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof, (ii)
holders of New Notes will not be entitled to any Additional Interest thereon
pursuant to certain circumstances under the Registration Rights Agreement and
(iii) holders of New Notes will no longer be entitled to certain other rights
under the Registration Rights Agreement. The New Notes will be issued only in
fully registered form without coupons, in denominations of $1,000 and integral
multiples thereof. Principal of, premium, if any, and interest on the Notes
are payable, and the Notes are exchangeable and transferable, at the office or
agency of the Company in the City of New York maintained for such purposes
(which initially will be the corporate trust office of the Trustee). See
"Book-Entry, Delivery and Form." No service charge will be made for any
registration of transfer, exchange or redemption of the Notes, except in
certain circumstances for any tax or other governmental charge that may be
imposed in connection therewith.
DMC has fully and unconditionally guaranteed payment of the Notes on an
unsecured senior subordinated basis. See "--Note Guarantees."
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on November 1, 2007. Interest on the Notes will accrue
at the rate of 10 1/4% per annum and will be payable semi-annually in arrears
on each May 1 and November 1, commencing May 1, 1998, to the holders of record
of Notes at the close of business on the April 15 and October 15,
respectively, immediately preceding such interest payment date. Interest on
the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the Issue Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
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<PAGE>
OPTIONAL REDEMPTION
Optional Redemption. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after November 1, 2002, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest thereon, if any, to the date of
redemption, if redeemed during the 12-month period beginning on November 1 of
the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002........................................................... 105.188%
2003........................................................... 103.458%
2004........................................................... 101.729%
2005 and thereafter............................................ 100.000%
</TABLE>
Optional Redemption upon Equity Offering. On or prior to November 1, 2000,
the Company may, at its option, use the net proceeds of an Equity Offering to
redeem up to 35% of the originally issued aggregate principal amount of the
Notes, at a redemption price in cash equal to 110.25% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided, however, that not less than $65.0 million in aggregate
principal amount of Notes is outstanding following such redemption. Notice of
any such redemption must be given not later than 60 days after the
consummation of the Equity Offering.
As used in the preceding paragraph, an "Equity Offering" means any public or
private sale of equity securities (other than Redeemable Capital Stock) of the
Company; provided, however, that the proceeds (net of any underwriting
discounts or commissions) to the Company from any such private sale of equity
securities shall be at least $20.0 million.
Selection and Notice. In the event that less than all of the Notes are to be
redeemed at any time, selection of Notes for redemption shall be made by the
Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes
are not listed on a national securities exchange, on a pro rata basis, by lot
or by such other method as the Trustee deems fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be
redeemed in part; provided, further, however, that any such redemption made
with the net proceeds of an Equity Offering shall be made on a pro rata basis
or on as nearly a pro rata basis as practicable (subject to the procedures of
DTC). Notice of redemption will be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each holder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in part
only, the notice of redemption that relates to such Note will state the
portion of the principal amount thereof to be redeemed. A New Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Note. On and
after the redemption date, interest will cease to accrue on Notes or portions
thereof called for redemption so long as the Company has deposited with the
paying agent for the Notes funds in satisfaction of the applicable redemption
price pursuant to the Indenture.
CHANGE OF CONTROL
The Indenture provides that, following the occurrence of a Change of Control
(the date of such occurrence being the "Change of Control Date"), the Company
will be obligated, not more than 40 or less than 20 business days after the
Change of Control Date, to make an offer to purchase (a "Change of Control
Offer") all of the then outstanding Notes at a purchase price (the "Change of
Control Purchase Price") in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the purchase
date. The Company will be required to purchase all Notes properly tendered
into the Change of Control Offer and not withdrawn.
In order to effect such Change of Control Offer, the Company will, not later
than the 40th business day after the Change of Control Date, be obligated to
mail to each holder of Notes notice of the Change of Control Offer, which
notice will govern the terms of the Change of Control Offer and will state,
among other things, the procedures that holders must follow to accept the
Change of Control Offer. The Change of Control Offer will be required to be
kept open for a period of at least 20 business days.
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<PAGE>
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes that might be tendered by holders of Notes seeking to accept the
Change of Control Offer. If the Company fails to repurchase all of the Notes
tendered for purchase, such failure will constitute an Event of Default under
the Indenture. See "--Events of Default" below.
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act, and any other applicable securities laws or
regulations and any applicable requirements of any securities exchange on
which the Notes are listed, in connection with the repurchase of Notes
pursuant to a Change of Control Offer, and any violation of the provisions of
the Indenture relating to such Change of Control Offer occurring as a result
of such compliance shall not be deemed a Default.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the Notes
will be subordinated in right of payment, as described below, to the prior
payment in full in cash or Cash Equivalents of all Senior Indebtedness.
The Indenture provides that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relating to the Company,
or any liquidation, dissolution or other winding-up of the Company, whether
voluntary or involuntary, or any assignment for the benefit of creditors or
other marshaling of assets or liabilities of the Company, all Senior
Indebtedness must be paid in full before any payment or distribution
(excluding any payment or distribution of certain permitted equity or
subordinated securities) is made on account of the principal of, premium, if
any, or interest on the Notes.
During the continuance of any default in the payment of any Designated
Senior Indebtedness pursuant to which the maturity thereof may immediately be
accelerated beyond any applicable grace period and after receipt by the
Trustee from representatives of holders of such Designated Senior Indebtedness
of written notice of such default, no payment or distribution of any assets of
the Company of any kind or character (excluding any payment or distribution of
certain permitted equity or subordinated securities) shall be made on account
of the principal of, premium, if any, or interest on, or the purchase,
redemption or other acquisition of, the Notes unless and until such default
has been cured or waived or has ceased to exist or such Designated Senior
Indebtedness shall have been discharged or paid in full.
During the continuance of any non-payment default with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may
immediately be accelerated (a "Non-payment Default") and after the receipt by
the Trustee from the representatives of holders of such Designated Senior
Indebtedness of a written notice of such Non-payment Default, no payment or
distribution of any assets of the Company of any kind or character (excluding
any payment or distribution of certain permitted equity or subordinated
securities) may be made by the Company on account of the principal of,
premium, if any, or interest on, or the purchase, redemption or other
acquisition of, the Notes for the period specified below (the "Payment
Blockage Period").
The Payment Blockage Period will commence upon the receipt of notice of a
Non-payment Default by the Trustee from the representatives of holders of
Designated Senior Indebtedness and will end on the earlier to occur of the
following events: (i) 179 days shall have elapsed since the receipt of such
notice of a Non-payment Default (provided that such Designated Senior
Indebtedness shall not theretofore have been accelerated), (ii) such default
is cured or waived or ceases to exist or such Designated Senior Indebtedness
is discharged or (iii) such Payment Blockage Period shall have been terminated
by written notice to the Company or the Trustee from the representatives of
holders of Designated Senior Indebtedness initiating such Payment Blockage
Period. After the end of any Payment Blockage Period the Company shall
promptly resume making any and all required payments in respect of the Notes,
including any missed payments. Notwithstanding anything in the subordination
provisions of the Indenture or the Notes to the contrary, (x) in no event
shall a Payment Blockage Period extend beyond 179 days from the date of the
receipt by the Trustee of the notice initiating such Payment Blockage Period,
(y) there shall be a period of at least 186 consecutive days in each 365-day
period when no Payment
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Blockage Period is in effect and (z) not more than one Payment Blockage Period
with respect to the Notes may be commenced within any period of 365
consecutive days. A Non-payment Default with respect to Designated Senior
Indebtedness that existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period cannot be made the basis for the
commencement of a second Payment Blockage Period, whether or not within a
period of 365 consecutive days, unless such default has been cured or waived
for a period of not less than 90 consecutive days and subsequently recurs.
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Notes to
accelerate the maturity thereof. See "--Events of Default."
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes and funds which would be
otherwise payable to the holders of the Notes will be paid to the holders of
Senior Indebtedness to the extent necessary to pay the Senior Indebtedness in
full, and the Company may be unable to meet its obligations fully with respect
to the Notes.
As of September 30, 1997, on a pro forma basis after giving effect to the
Offering, the application of the net proceeds therefrom and the DMC
Acquisition, the Company would have had outstanding $6.9 million of Senior
Indebtedness. In addition, subsidiaries of the Company would have had
outstanding $6.0 million of Indebtedness and other obligations to which
holders of Notes would have been effectively structurally subordinated,
because the claims of creditors of such subsidiaries effectively will have
priority with respect to the assets and earnings of such subsidiaries over the
claims of the Company and its creditors, including holders of the Notes. The
Indenture limits, but does not prohibit, the incurrence by the Company of
additional Indebtedness which is senior to the Notes, but prohibits the
incurrence of any Indebtedness contractually subordinated in right of payment
to any other Indebtedness of the Company and senior in right of payment to the
Notes. See "Risk Factors--Subordination."
NOTE GUARANTEES
DMC has fully and unconditionally guaranteed the Company's obligations under
the Notes. In addition, if any Domestic Subsidiary of the Company becomes a
Guarantor or obligor in respect of Indebtedness of the Company, the Company's
obligations under the Notes will be guaranteed by such Domestic Subsidiary.
See "--Certain Covenants--Limitation on Guarantees by Restricted
Subsidiaries." Subject to the subordination provisions described above, if the
Company defaults in payment of the principal of, premium, if any, or interest
on the Notes, DMC and each other Guarantor, if any, will be obligated to duly
and punctually pay the same.
The Indebtedness evidenced by each Note Guarantee (including the payment of
principal of, premium, if any, and interest on the Notes) is subordinated on
the same basis to Guarantor Senior Indebtedness (defined with respect to the
Indebtedness of any Guarantor) as the Notes are subordinated to Senior
Indebtedness. See "--Subordination." As of September 30, 1997, on a pro forma
basis, after giving effect to the Offering, the application of the net
proceeds therefrom and the DMC Acquisition, DMC had no outstanding Guarantor
Senior Indebtedness, however DMC had outstanding $6.0 million of Indebtedness
and other obligations to which holders of the Notes would have been
effectively structurally subordinated, because of the reasons described above.
CERTAIN COVENANTS
The Indenture contains the following covenants, among others:
Limitation on Indebtedness. The Company shall not, and shall not cause or
permit any of the Restricted Subsidiaries to, directly or indirectly, create,
incur, assume, issue, guarantee or in any manner become liable for or with
respect to, contingently or otherwise (in each case, to "incur"), the payment
of any Indebtedness (including any Acquired Indebtedness); provided, however,
that (i) the Company and any Guarantor may incur
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Indebtedness (including Acquired Indebtedness) and (ii) a Restricted
Subsidiary may incur Acquired Indebtedness, in each case if immediately after
giving pro forma effect thereto, the Consolidated Fixed Charge Coverage Ratio
of the Company and its Restricted Subsidiaries is at least equal to 2.0:1.0.
Notwithstanding the foregoing, the Company and, to the extent specifically
set forth below, the Restricted Subsidiaries may incur each and all of the
following (collectively, "Permitted Indebtedness"):
(i) Indebtedness of the Company or any Guarantor under the New Credit
Agreement in an aggregate principal amount at any time outstanding not to
exceed the greater of (x) $50.0 million and (y) the sum of 85% of the
consolidated book value of the net accounts receivable and 65% of the
consolidated book value of the inventory of the Company and its Restricted
Subsidiaries, in each case determined in accordance with GAAP;
(ii) Indebtedness under the Indenture, the Notes and the Note Guarantees;
(iii) Indebtedness of the Company or any Restricted Subsidiary not
otherwise referred to in this paragraph that is outstanding on the Issue
Date, except Indebtedness repaid with the proceeds of the issuance of the
Notes as described under "Use of Proceeds" (which is permitted hereunder);
(iv) Indebtedness of the Company or any Restricted Subsidiary in respect
of bid, payment or performance bonds, bankers' acceptances, letters of
credit of the Company or any Restricted Subsidiary and surety bonds
provided by the Company or any Restricted Subsidiary in the ordinary course
of business;
(v) Indebtedness of any Restricted Subsidiary owed to and held by the
Company or any Restricted Subsidiary, and Indebtedness of the Company owed
to and held by any other Restricted Subsidiary which is unsecured and
subordinated in right of payment to the payment and performance of the
Company's obligations under the Indenture and the Notes;
(vi) any guarantees of Indebtedness by a Restricted Subsidiary incurred
in compliance with the covenant described under "--Limitations on
Guarantees by Restricted Subsidiaries";
(vii) Interest Rate Protection Obligations of the Company or any
Restricted Subsidiary covering Indebtedness of the Company or any
Restricted Subsidiary (which Indebtedness (a) bears interest at fluctuating
interest rates and (b) is otherwise permitted to be incurred under this
covenant) to the extent the notional principal amount of such Interest Rate
Protection Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Rate Protection Obligations relate;
(viii) Indebtedness of the Company in respect of Purchase Money
Indebtedness in an amount not exceeding $2.0 million incurred in any one
fiscal year;
(ix) Indebtedness of the Company or any Restricted Subsidiary under
Currency Agreements relating to (a) Indebtedness of the Company or any
Restricted Subsidiary and/or (b) obligations to purchase or sell assets or
properties, in each case, incurred in the ordinary course of business of
the Company or any Restricted Subsidiary; provided, however, that such
Currency Agreements do not increase the Indebtedness or other obligations
of the Company and its Restricted Subsidiaries outstanding other than as a
result of fluctuations in foreign currency exchange rates or by reason of
fees, indemnities and compensation payable thereunder;
(x) (a) Indebtedness of the Company or any Guarantor to the extent the
proceeds thereof are used to Refinance Indebtedness of the Company or any
Guarantor or any Restricted Subsidiary and (b) Indebtedness of any
Restricted Subsidiary that is not a Guarantor to the extent the proceeds
thereof are used to Refinance Indebtedness of any Restricted Subsidiary
that is not a Guarantor, in each case other than the Indebtedness to be
Refinanced as described under "Use of Proceeds" herein and Indebtedness
incurred under clause (i) or (v) above; provided, however, that, in the
case of either clause (a) or (b), (1) the principal amount of Indebtedness
incurred pursuant to this clause (x) (or, if such Indebtedness provides for
an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the maturity thereof, the original issue
price of such Indebtedness) shall not exceed the sum of (A) the principal
amount of Indebtedness so Refinanced (or, if such Indebtedness provides for
an amount less than the principal
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amount thereof to be due and payable upon a declaration of acceleration of
the maturity thereof, the original issue price of such Indebtedness, plus
any accreted value attributable thereto since the original issuance of such
Indebtedness, plus any accreted value attributable thereto since the
issuance date of such Indebtedness), plus (B) the amount of any premium
required to be paid in connection with such Refinancing pursuant to the
terms of such Indebtedness or the amount of any premium reasonably
determined by the Company or a Restricted Subsidiary, as applicable, as
necessary to accomplish such Refinancing by means of a tender offer or
privately negotiated purchase, plus (C) the amount of expenses in
connection with such Refinancing; and (2) except in the case of Refinancing
or replacement of Senior Indebtedness or Guarantor Senior Indebtedness or
of any Indebtedness of any Restricted Subsidiary that is not a Guarantor,
Indebtedness incurred pursuant to this clause (x) hall not reduce the
Average Life to Stated Maturity of Indebtedness so Refinanced;
(xi) Indebtedness arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from guarantees of
letters of credit, surety bonds or payment or performance bonds securing
any obligations of the Company pursuant to such agreements, incurred or
assumed in connection with the disposition of any business, assets or
Subsidiary of the Company, other than guarantees or similar credit support
by the Company of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Subsidiary for the purpose of financing
such acquisition; and
(xii) in addition to the items referred to in clauses (i) through (xi)
above, additional Indebtedness of the Company or any Restricted Subsidiary
not to exceed an aggregate principal amount at any time outstanding of
$25.0 million.
Limitation on Restricted Payments. The Company shall not, and shall not
cause or permit any of the Restricted Subsidiaries, directly or indirectly,
to:
(i) declare or pay any dividend or make any other distribution or payment
on or in respect of Capital Stock of the Company or any Restricted
Subsidiary or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company or any Restricted
Subsidiary (other than dividends or distributions made to the Company or a
Restricted Subsidiary and dividends and distributions payable solely in
Capital Stock of the Company (other than Redeemable Capital Stock) or in
rights to purchase Capital Stock of the Company (other than Redeemable
Capital Stock)); or
(ii) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of the Company or any Restricted Subsidiary (other than
any such Capital Stock owned by the Company or a Restricted Subsidiary); or
(iii) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any Subordinated
Indebtedness owed to and held by a Restricted Subsidiary); or
(iv) make any Investment (other than a Permitted Investment) in any
Person (such payments or Investments described in clauses (i), (ii), (iii)
and (iv) are collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than in cash, being the
Fair Market Value of the asset(s) proposed to be transferred by the Company
or such Restricted Subsidiary, as the case may be, pursuant to such
Restricted Payment):
(A) no Default shall have occurred and be continuing;
(B) the Company could incur $1.00 of additional Indebtedness by
virtue of the Consolidated Fixed Charge Coverage Ratio set forth in the
first paragraph of the "Limitation on Indebtedness" covenant described
above; and
(C) the aggregate amount of all Restricted Payments declared or made
(and not repaid or reimbursed) from and after the Issue Date would not
exceed the sum of (1) 50% of cumulative Consolidated Net Income of the
Company during the period (treated as one accounting period)
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beginning on the first day of the fiscal quarter that includes the
Issue Date and ending on the last day of the fiscal quarter of the
Company immediately preceding the date of such proposed Restricted
Payment for which consolidated financial information of the Company is
internally available (or, if such cumulative Consolidated Net Income of
the Company for such period shall be a deficit, minus 100% of such
deficit), plus (2) the aggregate net cash proceeds received by the
Company either (x) as capital contributions in the form of common
equity to the Company after the Issue Date or (y) from the issuance or
sale of Capital Stock (excluding Redeemable Capital Stock and Capital
Stock to the extent the proceeds from the sale thereof are used to
redeem Notes but including Capital Stock issued upon the conversion of
convertible Indebtedness, in exchange for outstanding Indebtedness or
from the exercise of options, warrants or rights to purchase Capital
Stock (other than Redeemable Capital Stock)) of the Company to any
Person (other than to a Restricted Subsidiary of the Company) after the
Issue Date (excluding the net cash proceeds from any issuance and sale
of Capital Stock financed using funds borrowed from the Company or any
Restricted Subsidiary until and to the extent such borrowing is
repaid), plus (3) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Issue Date,
an amount equal to the lesser of the return of capital with respect to
such Investment and the initial amount of such Investment which was
treated as a Restricted Payment, in either case, less the cost of the
disposition of such Investment.
For purposes of the preceding clause (C)(2), upon the issuance of Capital
Stock either from the conversion of convertible Indebtedness or exchange for
outstanding Indebtedness or upon the exercise of options, warrants or rights,
the amount counted as net cash proceeds received will be the cash amount
received by the Company at the original issuance of the Indebtedness that is
so converted or exchanged or from the issuance of options, warrants or rights,
as the case may be, plus the incremental amount of cash received by the
Company, if any, upon the conversion, exchange or exercise thereof.
None of the foregoing provisions of this covenant will prohibit:
(i) the payment of any dividend within 60 days after the date of its
declaration, if at the date of declaration such payment would be permitted
by the provisions of the Indenture;
(ii) so long as no Default shall have occurred and be continuing or would
occur upon the consummation thereof, the redemption, repurchase or other
acquisition or retirement of any shares of any class of Capital Stock of
the Company in exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale of other shares of Capital Stock
(other than Redeemable Capital Stock) of the Company to any Person (other
than to a Restricted Subsidiary); provided, however, that any such net
proceeds and the value of any Capital Stock issued in exchange for such
retired Capital Stock are excluded from clause (C)(2) of the preceding
paragraph;
(iii) so long as no Default shall have occurred and be continuing or
would occur upon the consummation thereof, any redemption, repurchase or
other acquisition or retirement of Subordinated Indebtedness made by
exchange for, or out of the net cash proceeds of, a substantially
concurrent issue and sale of (A) Capital Stock (other than Redeemable
Capital Stock) of the Company to any Person (other than to a Restricted
Subsidiary); provided, however, that any such net cash proceeds and the
value of any Capital Stock issued in exchange for Subordinated Indebtedness
are excluded from clause (C)(2) of the preceding paragraph; or (B)
Indebtedness of the Company or any Restricted Subsidiary so long as such
Indebtedness (1) is subordinated to Senior Indebtedness and the Notes or
Guarantor Senior Indebtedness and the Note Guarantees of such Guarantor, as
the case may be, at least to the same extent as the Subordinated
Indebtedness so purchased, exchanged, redeemed, repurchased, acquired or
retired, and (2) has no Stated Maturity earlier than the Stated Maturity
for the final scheduled principal payment of the Notes;
(iv) Investments constituting Restricted Payments made as a result of the
receipt of non-cash consideration from any Asset Sale made pursuant to and
in compliance with the covenant "--Disposition of Proceeds of Asset Sales";
(v) the application of the net proceeds of the Offering on the Issue
Date, as described under "Use of Proceeds";
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(vi) so long as no Default shall have occurred and be continuing or would
occur upon the consummation thereof, the purchase, redemption or other
acquisition, cancellation or retirement for value of Capital Stock, or
options, warrants, equity appreciation rights or other rights to purchase
or acquire Capital Stock, of the Company or any Restricted Subsidiary, or
similar securities, held by officers or employees or former officers or
employees of the Company or any Restricted Subsidiary (or their estates or
beneficiaries under their estates), upon death, disability, retirement or
termination of employment (collectively "Repurchase Payments"), in an
amount not to exceed $2.0 million in any single fiscal year, provided that
to the extent such $2.0 million amount is not utilized in any single fiscal
year (beginning in the fiscal year containing the Issue Date) such amount
may be utilized in any future fiscal year;
(vii) so long as no Default shall have occurred and be continuing or
would occur upon the consummation thereof, in addition to Repurchase
Payments permitted under clause (vi), Repurchase Payments in an amount not
to exceed 50% of the sum of (A) Consolidated Net Income plus (B)
Consolidated Non-cash Charges minus (C) capital expenditures made by the
Company minus (D) other Repurchase Payments previously made pursuant to
this clause (vii), in each case determined with respect to the Company and
its Restricted Subsidiaries on a consolidated basis in accordance with GAAP
for the four full fiscal quarters immediately preceding the date of any
such proposed Repurchase Payment for which consolidated financial
information of the Company is internally available; provided, however, that
prior to making any such Repurchase Payment under this clause (vii) the
Company shall have first made an offer to purchase (which offer will be
required to be kept open for a period of at least 20 business days after
commencement thereof) to all holders of outstanding Notes up to a maximum
principal amount (expressed as a multiple of $1,000) of Notes equal to such
proposed Repurchase Payment (which, if consummated, shall be effected pro
rata based upon the aggregate principal amount of such Notes tendered by
each holder), at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the date of
such purchase; and to the extent the amount of such proposed Repurchase
Payment exceeds the aggregate amount of Notes tendered by the holders of
the Notes pursuant to such offer, the Company may make such Repurchase
Payment;
(viii) loans or advances to officers, directors and employees of the
Company or any Restricted Subsidiary in an aggregate amount not in excess
of $2.5 million at any one time outstanding;
(ix) so long as no Default shall have occurred and be continuing or would
occur upon the consummation thereof, dividends or distributions to
Permitted Holders who are also officers or directors of the Company, in an
aggregate amount not to exceed $2.0 million in respect of any single fiscal
year of the Company;
(x) payments by the Company in satisfaction of its obligations under the
Stockholder Agreements from the proceeds of life insurance policies
received by the Company or any Restricted Subsidiary; or
(xi) so long as the Company remains a Subchapter S corporation under the
Internal Revenue Code, the payment of dividends or the making of loans or
advances to the holders of the Company's Capital Stock in an amount equal
to the Tax Amount (the "Permitted Tax Payments").
In computing the amount of Restricted Payments previously made for purposes
of clause (C) of the preceding paragraph, amounts described under the
immediately preceding clauses (i), (vi) and (vii) shall be included.
Limitation on Transactions with Affiliates. The Company shall not, and shall
not cause or permit any of the Restricted Subsidiaries, directly or
indirectly, to, conduct any business or enter into or suffer to exist any
transaction or series of related transactions with, or for the benefit of, any
of their respective Affiliates (other than a Restricted Subsidiary so long as
no Affiliate of the Company or any beneficial holder of 5% or more of any
class or series of Capital Stock of the Company shall beneficially own any
Capital Stock in such Restricted Subsidiary) or any beneficial holder of 10%
or more of any class of Capital Stock of the Company or any officer or
director of the Company or any Restricted Subsidiary (each, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the Restricted Subsidiary, as the
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case may be, than those which could have been obtained in a comparable
transaction at such time from Persons who do not have such a relationship,
(ii) with respect to any Affiliate Transaction or series of Affiliate
Transactions involving aggregate payments or value equal to or greater than
$2.0 million, the Company shall have delivered an officers' certificate to the
Trustee certifying that such Affiliate Transaction or series of Affiliate
Transactions has been approved by a majority of the Board of Directors of the
Company, including a majority of the disinterested directors, if any, of the
Board of Directors of the Company, and (iii) with respect to any Affiliate
Transaction or series of Affiliate Transactions involving aggregate payments
or value equal to or greater than $5.0 million (or greater than $2.0 million
in the event there are no disinterested directors), the Company shall have
obtained a written opinion from an Independent Financial Advisor stating that
the terms of such Affiliate Transaction or series of Affiliate Transactions
are fair, from a financial point of view, to the Company or the Restricted
Subsidiary involved, as the case may be.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions with or among the Company and the
Restricted Subsidiaries; (ii) directors' fees, indemnification and similar
arrangements, consulting fees, employee salaries, bonuses or employment
agreements, compensation or employee benefit arrangements and incentive
arrangements with any officer, director or employee of the Company or any
Restricted Subsidiary entered into in the ordinary course of business
(including customary benefits thereunder) and payments under any
indemnification arrangements permitted by applicable law; (iii) the issue and
sale by the Company to its stockholders of Capital Stock (other than
Redeemable Capital Stock); (iv) any dividends made in compliance with the
provisions described under "--Limitation on Restricted Payments" above; (v)
loans and advances to officers, directors and employees of the Company or any
Restricted Subsidiary for travel, entertainment, moving and other relocation
expenses, in each case made in the ordinary course of business, and other
loans or advances to officers, directors and employees of the Company or any
Restricted Subsidiary in an aggregate amount not in excess of $2.5 million in
any fiscal year; and (vi) the incurrence of intercompany Indebtedness
permitted pursuant to clause (v) of the second paragraph of "--Limitation on
Indebtedness" above.
Disposition of Proceeds of Asset Sales. The Company shall not, and shall not
cause or permit any Restricted Subsidiary, directly or indirectly, to, make
any Asset Sale, unless (i) the Company or such Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the assets sold or otherwise disposed of and
(ii) at least 75% of such consideration consists of (A) cash or Cash
Equivalents, (B) properties and capital assets to be used in the same line of
business being conducted by the Company or any Restricted Subsidiary at such
time or (C) Capital Stock in any Person which thereby becomes a Restricted
Subsidiary whose assets consist primarily of properties and capital assets
used in the same line of business being conducted by the Company or any
Restricted Subsidiary at such time. The amount of any (i) Indebtedness (other
than any Subordinated Indebtedness) of the Company or any Restricted
Subsidiary actually assumed by the transferee in such Asset Sale and from
which the Company and the Restricted Subsidiaries are fully released and (ii)
notes or other similar obligations received by the Company or the Restricted
Subsidiaries from such transferee that are immediately converted, sold or
exchanged (or are converted, sold or exchanged within thirty days of the
related Asset Sale) by the Company or the Restricted Subsidiaries into cash,
in an amount equal to the net cash proceeds realized upon such conversion,
sale or exchange, shall be deemed to be cash for purposes of determining the
percentage of cash or Cash Equivalent consideration received by the Company or
the Restricted Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may (i) apply
the Net Cash Proceeds of any Asset Sale within 365 days of receipt thereof to
permanently repay Senior Indebtedness or Indebtedness (for purposes of this
clause, a repayment of any amount owing under a revolving credit facility
shall be deemed a permanent repayment to the extent the amount represented by
such repayment is not drawn upon by the Company for a period of six months
after such repayment) of any Restricted Subsidiary that is not subordinated in
right of payment to any Indebtedness of such Restricted Subsidiary, provided,
however, that no such repayment shall affect the amount permitted under clause
(i) of the second paragraph of the covenant "--Limitation on Indebtedness," or
(ii) commit in writing within 365 days after the receipt thereof to acquire,
construct or improve
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properties and capital assets to be used in the same line of business as being
conducted by the Company or any Restricted Subsidiary at such time and so
apply such Net Cash Proceeds within 365 days after the receipt thereof.
To the extent all or part of the Net Cash Proceeds of any Asset Sale are not
applied (or, in the case of clause (ii) above, committed to be so applied in
writing) within 365 days of such Asset Sale as described in clause (i) or (ii)
of the immediately preceding paragraph (such Net Cash Proceeds, the
"Unutilized Net Cash Proceeds"), the Company shall, within 20 business days
after such 365th day, make an offer to purchase (the "Asset Sale Offer") to
all holders of outstanding Notes up to a maximum principal amount (expressed
as a multiple of $1,000) of Notes equal to such Unutilized Net Cash Proceeds,
at a purchase price in cash equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the date of such
purchase; provided, however, that the Asset Sale Offer shall not be required
to be made until there are aggregate Unutilized Net Cash Proceeds equal to or
in excess of $7.5 million, at which time the entire amount of such Unutilized
Net Cash Proceeds, and not just the amount in excess of $7.5 million, shall be
applied as required pursuant to this paragraph. An Asset Sale Offer will be
required to be kept open for a period of at least 20 business days after
commencement thereof.
With respect to any Asset Sale Offer effected pursuant to this covenant, to
the extent the aggregate principal amount of Notes tendered pursuant to such
Asset Sale Offer exceeds the Unutilized Net Cash Proceeds to be applied to the
repurchase thereof, such Notes shall be purchased pro rata based on the
aggregate principal amount of such Notes tendered by each holder. To the
extent the Unutilized Net Cash Proceeds exceed the aggregate amount of Notes
tendered by the holders of the Notes pursuant to such Asset Sale Offer, the
Company may retain and utilize any portion of the Unutilized Net Cash Proceeds
not applied to repurchase the Notes for any purpose consistent with the other
terms of the Indenture.
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act, and any other applicable securities laws or
regulations and any applicable requirements of any securities exchange on
which the Notes are listed, and any violation of the provisions of the
Indenture relating to such Asset Sale Offer occurring as a result of such
compliance shall not be deemed a Default.
Limitation on Liens. The Company shall not, and shall not cause or permit
any Restricted Subsidiary to, create, incur, assume or suffer to exist any
Lien of any kind, upon any of its property or assets, whether now owned or
acquired after the Issue Date, or any proceeds therefrom, which secure either
(i) Subordinated Indebtedness unless the Notes, in the case of the Company,
and the Note Guarantees, if any, are secured by a Lien on such property,
assets or proceeds senior in priority to the Liens securing such Subordinated
Indebtedness or (ii) Pari Passu Indebtedness unless the Notes, in the case of
the Company, and the Note Guarantees, are equally and ratably secured with the
Liens securing such Pari Passu Indebtedness.
Limitation on Other Senior Subordinated Indebtedness. Neither the Company
nor any Guarantor shall create, incur, assume, guarantee or in any other
manner become liable with respect to any Indebtedness (other than the Notes
and the Note Guarantees) subordinate in right of payment to any Indebtedness
of the Company or of such Guarantor, as the case may be, unless such
Indebtedness is either (i) pari passu in right of payment with the Notes or
such Note Guarantee, as the case may be, or (ii) subordinate in right of
payment to the Notes or such Note Guarantee, as the case may be, in the same
manner and at least to the same extent as the Notes are subordinated to Senior
Indebtedness or as such Note Guarantee is subordinated to Guarantor Senior
Indebtedness, as the case may be.
Limitation on Guarantees by Restricted Subsidiaries. The Company shall not
cause or permit any of the Domestic Subsidiaries, directly or indirectly, to
guarantee the payment of any Indebtedness of the Company or any Restricted
Subsidiary unless such Domestic Subsidiary (A) is a Guarantor or (B)
simultaneously executes and delivers a supplemental indenture to the Indenture
pursuant to which it will become a Guarantor under the Indenture.
Notwithstanding the foregoing, any Note Guarantee by a Restricted Subsidiary
shall be automatically and unconditionally released and discharged upon any
sale, exchange or transfer, to any Person not an Affiliate of the Company, of
all of the Capital Stock of such Restricted Subsidiary, or all or
substantially all the assets of
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such Restricted Subsidiary, pursuant to a transaction which is in compliance
with the Indenture. The Company may, at any time, cause a Restricted
Subsidiary to become a Guarantor by executing and delivering a supplemental
indenture providing for the guarantee of payment of the Notes by such
Restricted Subsidiary on the basis provided in the Indenture.
Restrictions on Preferred Stock of Restricted Subsidiaries. The Company
shall not sell, and shall not cause or permit any of the Restricted
Subsidiaries to issue, any Preferred Stock of any Restricted Subsidiary (other
than to the Company or to a Wholly-Owned Restricted Subsidiary) or permit any
Person (other than the Company or a Wholly-Owned Restricted Subsidiary) to own
any Preferred Stock of any Restricted Subsidiary.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company shall not, and shall not cause or permit any
Restricted Subsidiary, directly or indirectly, to create or otherwise cause or
suffer to exist, or enter into any agreement with any Person that would cause
to become effective, any consensual encumbrance or restriction of any kind, on
the ability of any Restricted Subsidiary to (a) pay dividends, in cash or
otherwise, or make any other distribution on or in respect of its Capital
Stock or any other interest or participation in, or measured by, its profits,
to the Company or any other Restricted Subsidiary, (b) pay any Indebtedness
owed to the Company or any other Restricted Subsidiary, (c) make loans or
advances to, or guarantee any Indebtedness or other obligations of, the
Company or any other Restricted Subsidiary or (d) transfer any of its property
or assets to the Company or any other Restricted Subsidiary, except (i) any
encumbrance or restriction existing under the security documentation for the
New Credit Agreement as in effect on the Issue Date relating to assets subject
to a Lien created thereby, and with respect to a Restricted Subsidiary that is
not a Restricted Subsidiary on the Issue Date, existing at the time such
Person becomes a Restricted Subsidiary (but not created in contemplation
thereof); provided, however, that such encumbrances and restrictions are not
applicable to the Company or any Restricted Subsidiary, or the properties or
assets of the Company or any Restricted Subsidiary; (ii) customary non-
assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices; (iii) Purchase Money Indebtedness
for property acquired in the ordinary course of business that only imposes
encumbrances and restrictions on the property so acquired; (iv) any agreement
for the sale or disposition of the Capital Stock or assets of any Restricted
Subsidiary; provided, however, that such encumbrances and restrictions
described in this clause (iv) are only applicable to such Restricted
Subsidiary or assets, as applicable, and any such sale or disposition is made
in compliance with "Disposition of Proceeds of Asset Sales" above to the
extent applicable thereto; and (v) any encumbrance or restriction existing
under any agreement that refinances or replaces the agreements containing the
encumbrance or restrictions in the foregoing clauses (i) through (iv);
provided, however, that the terms and conditions of any such restrictions
permitted under this clause (v) are not materially less favorable to the
holders of the Notes than those under or pursuant to the agreement evidencing
the Indebtedness refinanced.
Limitation on Designations of Unrestricted Subsidiaries. The Company may
designate after the Issue Date any Subsidiary (other than a Guarantor) as an
"Unrestricted Subsidiary" under the Indenture (a "Designation") only if:
(i) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(ii) the Company would be permitted to make an Investment at the time of
Designation (assuming the effectiveness of such Designation) in an amount
(the "Designation Amount") equal to the Fair Market Value of the Company's
interest in such Subsidiary on such date; and
(iii) the Company would be permitted under the Indenture to incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the covenant described under "--Limitation on Indebtedness" at the time of
such Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
described under "--Limitation on Restricted Payments" for all purposes of the
Indenture in the Designation Amount.
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The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(i) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
Reporting Requirements. So long as any of the Notes are outstanding, the
Company will file with the Commission, to the extent then permitted by the
Commission, the annual reports, quarterly reports and other documents that the
Company would have been required to file with the Commission pursuant to
Sections 13(a) and 15(d) of the Exchange Act if the Company was subject to
such Sections, and the Company will promptly provide to the Trustee copies of
such reports and documents; provided, however, that if the Company is for any
reason unable to make such filings it will make available, upon request, to
any holder of Notes or prospective purchaser of Notes, the information
specified in Rule 144(A)(d)(4) of the Securities Act.
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
The Indenture provides that the Company shall not, in any transaction or
series of related transactions, merge or consolidate with or into, or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially
all of its properties and assets as an entirety to, any Person or Persons, and
that the Company shall not permit any of the Restricted Subsidiaries to enter
into any such transaction or series of related transactions if such
transaction or series of related transactions, in the aggregate, would result
in a sale, assignment, conveyance, transfer, lease or other disposition of all
or substantially all of the properties and assets of the Company and the
Restricted Subsidiaries (determined on a consolidated basis for the Company
and the Restricted Subsidiary), to any Person or Persons, unless at the time
and after giving effect thereto (i) either (A)(1) if the transaction or
transactions is a merger or consolidation involving the Company, the Company
shall be the Surviving Person of such merger or consolidation or (2) if the
transaction or transactions is a merger or consolidation involving a
Restricted Subsidiary, such Restricted Subsidiary shall be the Surviving
Person of such merger or consolidation, or (B)(1) the Surviving Person shall
be a corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and (2)(x) in the case
of a transaction involving the Company, the Surviving Person shall expressly
assume by a supplemental indenture executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company under the
Notes and the Indenture and the Registration Rights Agreement, and in each
case, the Indenture and the Registration Rights Agreement shall remain in full
force and effect, or (y) in the case of a transaction involving a Restricted
Subsidiary that is a Guarantor, the Surviving Person shall expressly assume by
a supplemental indenture executed and delivered to the Trustee, inform
satisfactory to the Trustee, all the obligations of such Restricted Subsidiary
under its Note Guarantee and the Indenture and the Registration Rights
Agreement, and in each case, such Indenture and the Registration Rights
Agreement shall remain in full force and effect; (ii) immediately after giving
effect to such transaction or series of related transactions on a pro forma
basis, no Default shall have occurred and be continuing; and (iii) the
Company, or the Surviving Person, as the case may be, immediately after giving
effect to such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the first paragraph of the "--Limitation on
Indebtedness" covenant described above.
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, transfer, lease or other disposition and the
supplemental indenture in respect thereof comply with the
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requirements under the Indenture. In addition, each Guarantor, in the case of
a transaction described in the first paragraph hereunder, unless it is the
other party to the transaction or unless its Note Guarantee will be released
and discharged in accordance with its terms as a result of the transaction,
will be required to confirm, by supplemental indenture, that its Note
Guarantee will continue to apply to the obligations of the Company or the
Surviving Person under the Indenture.
Upon any consolidation or merger of the Company or any Guarantor or any
transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company or a Guarantor is not the
Surviving Person, the Surviving Person shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under the
Indenture and the Notes and the Registration Rights Agreement or such
Guarantor under the Indenture, the Note Guarantee of such Guarantor and the
Registration Rights Agreement, as the case may be, with the same effect as if
such successor corporation had been named as the Company or Guarantor, as the
case may be, therein; and thereafter, except in the case of (a) a lease or (b)
any sale, assignment, conveyance, transfer, lease or other disposition to a
Restricted Subsidiary of the Company or such Guarantor, the Company shall be
discharged from all obligations and covenants under the Indenture and the
Notes and such Guarantor shall be discharged from all obligations and
covenants under the Indenture and the Note Guarantee of such Guarantor, as the
case may be.
The Indenture provides that for all purposes of the Indenture and the Notes
(including the provisions of this covenant and the covenants described in "--
Limitation on Indebtedness," "--Limitation on Restricted Payments" and
"Limitation on Liens"), Subsidiaries of any Surviving Person shall, upon such
transaction or series of related transactions, become Restricted Subsidiaries
unless and until designated as Unrestricted Subsidiaries pursuant to and in
accordance with "--Limitation on Designations of Unrestricted Subsidiaries"
and all Indebtedness, and all Liens on property or assets, of the Company and
the Restricted Subsidiaries in existence immediately prior to such transaction
or series of related transactions will be deemed to have been incurred upon
consummation of such transaction or series of related transactions.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any, when
due and payable, on any of the Notes (at its Stated Maturity, upon optional
redemption, required purchase, scheduled principal payment or otherwise);
or
(ii) default in the payment of an installment of interest on any of the
Notes, when due and payable, continued for 30 days or more; or
(iii) the Company or any Guarantor fails to comply with any of its
obligations described under
"--Consolidation, Merger, Sale of Assets, Etc.," "--Certain Covenants--
Change of Control" or
"--Certain Covenants--Disposition of Proceeds of Asset Sales"; or
(iv) the Company or any Guarantor fails to perform or observe any other
term, covenant or agreement contained in the Notes, the Note Guarantees or
the Indenture (other than a default specified in (i), (ii) or (iii) above)
for a period of 30 days after written notice of such failure requiring the
Company to remedy the same shall have been given (x) to the Company by the
Trustee or (y) to the Company and the Trustee by the holders of 25% in
aggregate principal amount of the Notes then outstanding; or
(v) default or defaults under one or more agreements, indentures or
instruments under which the Company or any Restricted Subsidiary then has
outstanding Indebtedness in excess of $7.5 million individually or in the
aggregate and either (a) such Indebtedness is already due and payable in
full or (b) such default or defaults results in the acceleration of the
maturity of such Indebtedness; or
(vi) any Note Guarantee ceases to be in full force and effect or is
declared null and void or any Guarantor denies that it has any further
liability under any Note Guarantee, or gives notice to such effect (other
than by reason of the termination of the Indenture or the release of any
such Note Guarantee in
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accordance with "--Certain Covenants--Limitation on Guarantees by
Restricted Subsidiaries") and such condition shall have continued for a
period of 30 days after notice to the Company by the Trustee; or
(vii) one or more judgments, orders or decrees of any court or regulatory
or administrative agency for the payment of money in excess of $7.5 million
either individually or in the aggregate shall have been rendered against
the Company or any Restricted Subsidiary or any of their respective
properties and shall not have been discharged and either (a) any creditor
shall have commenced an enforcement proceeding upon such judgment, order or
decree, and such judgment is not being appealed by the Company or (b) there
shall have been a period of 60 consecutive days during which a stay of
enforcement of such judgment, order or decree, by reason of a pending
appeal or otherwise, shall not be in effect; or
(viii) certain events of bankruptcy, insolvency or reorganization with
respect to the Company or any Material Subsidiary of the Company shall have
occurred.
If an Event of Default (other than as specified in clause (viii) with
respect to the Company) shall occur and be continuing, the Trustee, by notice
to the Company, or the holders of at least 25% in aggregate principal amount
of the Notes then outstanding, by notice to the Trustee and the Company, may
declare the principal of, premium, if any, and accrued interest on all of the
outstanding Notes due and payable immediately, upon which declaration all such
amounts payable in respect of the Notes will become and be immediately due and
payable; provided, however, that so long as the New Credit Agreement shall be
in force and effect, if an Event of Default shall have occurred and be
continuing (other than an Event of Default under clause (viii) with respect to
the Company), any such acceleration shall not be effective until the earlier
to occur of (x) five business days following delivery of a notice of such
acceleration to the agent under the New Credit Agreement and (y) the
acceleration of any Indebtedness under the New Credit Agreement. If an Event
of Default specified in clause (viii) above with respect to the Company occurs
and is continuing, then the principal of, premium, if any, and accrued
interest on all of the outstanding Notes will ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Trustee or any holder of Notes.
Notwithstanding the preceding paragraph, in the event of a declaration of
acceleration in respect of the Notes because an Event of Default specified in
clause (v) shall have occurred and be continuing, such declaration of
acceleration will be automatically annulled if the Indebtedness that is the
subject of such Event of Default has been discharged or paid (if permitted by
the terms thereof and the Indenture) or the requisite holders thereof have
rescinded their declaration of acceleration in respect of such Indebtedness,
and written notice of such discharge or rescission, as the case may be, shall
have been given to the Trustee by the Company, within 60 days after such
declaration of acceleration in respect of the Notes and no other Event of
Default has occurred which has not been cured or waived during such 60-day
period.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of the outstanding Notes, by written
notice to the Company and the Trustee, may rescind such declaration if (a) the
Company has paid or deposited with the Trustee a sum sufficient to pay (i) all
sums paid or advanced by the Trustee under the Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, (ii) all overdue interest on all Notes, (iii) the principal of
and premium, if any, on any Notes which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne by the
Notes and (iv) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the Notes; and (b) all Events of
Default, other than the non-payment of principal of, premium, if any, and
interest on the Notes that has become due solely by such declaration of
acceleration, have been cured or waived.
No holder of any of the Notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the Notes and the Indenture, the Trustee has
failed to institute such proceeding within 15 days after receipt of such
notice and the Trustee, within such 15-day period, has not received directions
inconsistent
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with such written request by holders of a majority in aggregate principal
amount of the outstanding Notes. Such limitations do not apply, however, to a
suit instituted by a holder of a Note for the enforcement of the payment of
the principal of, premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent Person
would exercise under the circumstances in the conduct of such Person's own
affairs. Subject to the provisions of the Indenture relating to the duties of
the Trustee, in case an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to certain provisions concerning the rights of
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee under the Indenture.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and any Guarantor of their respective
obligations under the Indenture and as to any default in such performance. The
Company is also required to notify the Trustee within ten business days of any
event which is, or after notice or lapse of time or both would become, an
Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations of
the Company and any Guarantor with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company will be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of outstanding Notes to receive
payment in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Company's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes and maintain an office or agency
for payments in respect of the Notes, (iii) the rights, powers, trusts, duties
and immunities of the Trustee and (iv) the defeasance provisions of the
Indenture. In addition, the Company may, at its option and at any time, elect
to terminate the obligations of the Company and any Guarantor with respect to
certain covenants that are set forth in the Indenture, some of which are
described under "--Certain Covenants" above, and any omission to comply with
such obligations will not constitute a Default or an Event of Default with
respect to the Notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay the principal of, premium, if any,
and interest on the outstanding Notes at maturity; (ii) the Company shall have
delivered to the Trustee an opinion of counsel to the effect that the holders
of the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such defeasance or covenant defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred (in the case of defeasance, such opinion
must refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable federal income tax laws); (iii) no Default shall have
occurred and be continuing on the date of such deposit; (iv) such defeasance
or covenant defeasance shall not cause the Trustee to have a conflicting
interest with respect to any securities of the Company or any Guarantor; (v)
such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, any material agreement or
instrument to which the Company or any Guarantor is a party or by which it is
bound; (vi) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Senior
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Indebtedness, including, without limitation, those arising under the Indenture
and (B) after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; and (vii) the Company
shall have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent under the Indenture to
either defeasance or covenant defeasance, as the case may be, have been
complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company or any Guarantor has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the Notes
not theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may
be; (ii) the Company or any Guarantor has paid all other sums payable under
the Indenture by the Company and any Guarantor; and (iii) the Company and each
Guarantors have delivered to the Trustee an officers' certificate and an
opinion of counsel each stating that all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture have
been complied with.
AMENDMENTS AND WAIVERS
From time to time, the Company and any Guarantor, when authorized by
resolutions of their boards of directors, and the Trustee may, without the
consent of the holders of any outstanding Notes, amend, waive or supplement
the Indenture or the Notes for certain specified purposes, including, among
other things, curing ambiguities, defects or inconsistencies, qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act,
or making any change that does not materially adversely affect the legal
rights of any holder; provided, however, that the Company has delivered to the
Trustee an opinion of counsel stating that such change does not materially
adversely affect the legal rights of any holder. Other amendments and
modifications of the Indenture or the Notes may be made by the Company, any
Guarantor and the Trustee with the consent of the holders of not less than a
majority of the aggregate principal amount of the outstanding Notes; provided,
however, that no such modification or amendment may, without the consent of
the holder of each outstanding Note affected thereby, (i) change the maturity
of the principal of or any installment of interest on any such Note or alter
the optional redemption or repurchase provisions of any such Note or the
Indenture in a manner adverse to the holders of the Notes; (ii) reduce the
principal amount (or the premium) of any such Note; (iii) reduce the rate of
or extend the time for payment of interest on any such Note; (iv) change the
place or currency of payment of principal of (or premium) or interest on any
such Note; (v) modify any provisions of the Indenture relating to the waiver
of past defaults (other than to add sections of the Indenture or the Notes
subject thereto) or the right of the holders of Notes to institute suit for
the enforcement of any payment on or with respect to any such Note or any Note
Guarantee in respect thereof or the modification and amendment provisions of
the Indenture and the Notes (other than to add section of the Indenture or the
Notes which may not be amended, supplemented or waived without the consent of
each holder therein affected); (vi) reduce the percentage of the principal
amount of outstanding Notes necessary for amendment to or waiver of compliance
with any provision of the Indenture or the Notes or for waiver of any Default
in respect thereof; (vii) waive a default in the payment of principal of,
interest on, or redemption payment with respect to, the Notes (except a
rescission of acceleration of the Notes by the holders thereof as provided in
the Indenture and a waiver of the payment default that resulted from such
acceleration); (viii) modify the ranking or priority of any Note or the Note
Guarantee in respect thereof of any Guarantor or modify the definition of
Senior Indebtedness or Guarantor Senior Indebtedness or amend or modify
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the subordination provisions of the Indenture in any manner adverse to the
holders of the Notes; or (ix) release any Guarantor from any of its
obligations under its Note Guarantee or the Indenture otherwise than in
accordance with the Indenture.
The holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all holders of Notes, may waive compliance by the Company
and any Guarantor with certain restrictive provisions of the Indenture.
Subject to certain rights of the Trustee, as provided in the Indenture, the
holders of a majority in aggregate principal amount of the Notes, on behalf of
all holders of the Notes, may waive any past default under the Indenture
(including any such waiver obtained in connection with a tender offer or
exchange offer for the Notes), except a default in the payment of principal,
premium or interest or a default arising from failure to purchase any Notes
tendered pursuant to an optional redemption or repurchase, or a default in
respect of a provision that under the Indenture cannot be modified or amended
without the consent of the holder of each Note that is affected.
GOVERNING LAW
The Indenture, the Notes and the Note Guarantees are governed by the laws of
the State of New York, without regard to the principles of conflicts of law.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (i) assumed in
connection with an Asset Acquisition from such Person or (ii) existing at the
time such Person becomes a Restricted Subsidiary of any other Person (other
than any Indebtedness incurred in connection with, or in contemplation of,
such Asset Acquisition or such Person becoming such a Restricted Subsidiary).
"Affiliate" means, with respect to any specified Person (i) any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any other Person that
owns, directly or indirectly, 10% or more of any class or series of such
Person's, or the parent of such Person's, capital stock or any officer,
director or affiliate of any such other Person or (iii) with respect to any
other natural Person, any Person having a relationship with such other person
by blood, marriage or adoption not more remote than first cousin. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of Voting Stock, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Affiliate Transaction" has the meaning set forth under "--Limitation on
Transactions with Affiliates."
"Asset Acquisition" means (i) an Investment by the Company or any Restricted
Subsidiary in any other Person pursuant to which such Person will become a
Restricted Subsidiary or will be merged or consolidated with or into the
Company or any Restricted Subsidiary or (ii) the acquisition by the Company or
any Restricted Subsidiary of the assets of any Person which constitute
substantially all of the assets of such Person, or any division or line of
business of such Person, or which is otherwise outside of the ordinary course
of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition (including, without limitation, any
merger, consolidation or sale-leaseback transaction) to any Person other than
the Company or a Restricted Subsidiary, in one or a series of related
transactions, of (i) any Capital Stock of any Restricted Subsidiary; (ii) all
or substantially all of the assets of any division or line of business of the
Company or any Restricted Subsidiary; or (iii) any other properties or assets
of the Company or any Restricted Subsidiary other than in the ordinary course
of business. For the purposes of this definition, the term "Asset Sale" will
not include (a) any sale, issuance, conveyance, transfer, lease or other
disposition of properties or assets governed by the provisions described under
"Consolidation, Merger, Sale of Assets, Etc."; (b) sales of property or
equipment that have become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with
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the business of the Company or any Restricted Subsidiary, as the case may be;
or (c) any transaction consummated in compliance with "--Certain Covenants--
Limitation on Restricted Payments." For purposes of the covenant described
under "Disposition of Proceeds of Asset Sales," the term "Asset Sale" shall
not include any sale, conveyance, transfer, lease or other disposition of any
property or asset, whether in one transaction or a series of related
transactions, involving assets with a Fair Market Value not in excess of $1.0
million.
"Asset Sale Offer" has the meaning set forth under "--Disposition of
Proceeds of Asset Sales."
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from such date to the date or dates
of each successive scheduled principal payment (including, without limitation,
any sinking fund requirements) of such Indebtedness multiplied by (b) the
amount of each such principal payment by (ii) the sum of all such principal
payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participation, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) required to be classified and accounted for as a capital
lease obligation under GAAP, and, for the purpose of the Indenture, the amount
of such obligation at any date shall be the capitalized amount thereof at such
date, determined in accordance with GAAP consistently applied.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with
a maturity of not more than one year issued or directly and fully guaranteed
or insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of not more than one year of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500,000,000; (iii)
commercial paper with a maturity of not more than one year issued by a
corporation that is not an Affiliate of the Company organized under the laws
of any state of the United States or the District of Columbia and rated at
least A-1 by Standard & Poor's Rating Services, a division of the McGraw Hill
Companies, Inc. or at least P-1 by Moody's Investors Service, Inc.; and (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i) and (ii) above entered into
with any financial institution meeting the qualifications specified in clause
(ii) above.
"Change of Control" means the occurrence of any of the following events: (i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), other than Permitted Holders or their successors and
assigns who are Affiliates of the Permitted Holders, members of their families
and their heirs and executors, is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
will be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of 50% of the
total voting power of the then outstanding Voting Stock of the Company; (ii)
the Company consolidates with, or merges with or into, another Person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person (other than any such transaction
where the holders of the Voting Stock of the Company immediately prior to such
transaction own, directly or indirectly, not less than a majority of the total
voting power of the then outstanding Voting Stock of the surviving or
transferee corporation immediately after such transaction); or (iii) during
any consecutive two-year period, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any
new directors whose election by such Board of Directors or whose nomination
for election by the stockholders of the Company was approved by a vote of 66
2/3% of the directors then still in office who were
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either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
"Change of Control Offer" has the meaning set forth under "--Change of
Control."
"Consolidated Cash Flow Available for Fixed Charges" means, for any period,
(i) the sum of, without duplication, the amounts for such period, taken as a
single accounting period, of (a) Consolidated Net Income, (b) to the extent
reducing Consolidated Net Income, Consolidated Non-cash Charges, (c) to the
extent reducing Consolidated Net Income, Consolidated Interest Expense, and
(d) to the extent reducing Consolidated Net Income, Consolidated Income Tax
Expense less (ii) (A) all non-cash items increasing Consolidated Net Income
for such period and (B) all cash payments during such period relating to non-
cash charges that were added back in determining Consolidated Cash Flow
Available for Fixed Charges in any prior period.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of the aggregate
amount of Consolidated Cash Flow Available for Fixed Charges of the Company
for the four full fiscal quarters immediately preceding the date of the
transaction (the "Transaction Date") giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio for which consolidated financial
information of the Company is internally available (such four full fiscal
quarter period being referred to herein as the "Four Quarter Period") to the
aggregate amount of Consolidated Fixed Charges of the Company for such Four
Quarter Period. For purposes of this definition, "Consolidated Cash Flow
Available for Fixed Charges" and "Consolidated Fixed Charges" will be
calculated, without duplication, after giving effect on a pro forma basis for
the period of such calculation to (i) the incurrence of any Indebtedness of
the Company or any of the Restricted Subsidiaries during the period commencing
on the first day of the Four Quarter Period to and including the Transaction
Date (the "Reference Period"), including, without limitation, the incurrence
of the Indebtedness giving rise to the need to make such calculation, as if
such incurrence occurred on the first day of the Reference Period, (ii) an
adjustment to eliminate or include, as applicable, the Consolidated Cash Flow
Available for Fixed Charges and Consolidated Fixed Charges of the Company
directly attributable to assets which are the subject of any Asset Sale or
Asset Acquisition (including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of the Company or one of
the Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness) occurring during the
Reference Period, as if such Asset Sale or Asset Acquisition occurred on the
first day of the Reference Period and (iii) the retirement of Indebtedness
during the Reference Period which cannot thereafter be reborrowed occurring as
if retired on the first day of the Reference Period. Furthermore, in
calculating Consolidated Fixed Charges for purposes of determining the
denominator (but not the numerator) of this definition of "Consolidated Fixed
Charge Coverage Ratio," (1) interest on Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter will be deemed to accrue at a fixed rate per annum equal
to the rate of interest on such Indebtedness in effect on the Transaction
Date; (2) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date shall be deemed to
have been in effect during the Reference Period; and (3) notwithstanding
clause (1) above, interest on Indebtedness determined on a fluctuating basis,
to the extent such interest is covered by agreements relating to Interest Rate
Protection Obligations, will be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements. If the
Company or any Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the above definition will give effect to the
incurrence of such guaranteed Indebtedness as if the Company or any Restricted
Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Fixed Charges" means, for any period, the sum of, without
duplication, the amounts for such period of (i) Consolidated Interest Expense;
and (ii) the aggregate amount of cash dividends and other distributions paid
or accrued during such period in respect of Redeemable Capital Stock of the
Company.
"Consolidated Income Tax Expense" means, for any period, the provision for
federal, state, local and foreign income taxes payable by the Company and the
Restricted Subsidiaries for such period as determined on a consolidated basis
in accordance with GAAP, plus any Permitted Tax Payments made during such
period.
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"Consolidated Interest Expense" means, for any period, without duplication,
the sum of (a) the interest expense of the Company and the Restricted
Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (i) any amortization of
debt discount attributable to such period, (ii) the net cost under Interest
Rate Protection Obligations (including any amortization of discounts), (iii)
the interest portion of any deferred payment obligation, (iv) all commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financing and (v) all capitalized interest and all
accrued interest, and (b) all but the principal component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by the
Company and the Restricted Subsidiaries during such period and as determined
on a consolidated basis in accordance with GAAP, minus amortization of
deferred financing costs and expenses.
"Consolidated Net Income" means, for any period, the consolidated net income
(or loss) of the Company and the Restricted Subsidiaries for such period as
determined in accordance with GAAP, adjusted, to the extent included in
calculating such net income, by excluding, without duplication, (i) all
extraordinary gains or losses (net of fees and expenses relating to the
transaction giving rise thereto), (ii) the portion of net income (or loss) of
the Company and the Restricted Subsidiaries allocable to minority interests in
unconsolidated Persons, except to the extent that cash dividends or
distributions are actually received by the Company or one of the Restricted
Subsidiaries, (iii) net income (or loss) of any Person combined with the
Company or one of the Restricted Subsidiaries in a "pooling of interests"
basis attributable to any period prior to the date of combination, (iv) any
gain or loss, net of taxes, realized upon the termination of any employee
pension benefit plan, (v) gains or losses in respect of any Asset Sales by the
Company or one of the Restricted Subsidiaries (net of fees and expenses
relating to the transaction giving rise thereto), (vi) the net income of any
Restricted Subsidiary to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is not at
the time permitted, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulations applicable to that Restricted Subsidiary or its
stockholders and (vii) any Permitted Tax Payments made during such period.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of the Company and the
Restricted Subsidiaries reducing Consolidated Net Income for such period,
determined on a consolidated basis in accordance with GAAP.
"covenant defeasance" has the meaning set forth under "--Defeasance or
Covenant Defeasance of Indenture."
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company against fluctuations in currency values.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Defeasance" has the meaning set forth under "--Defeasance or Covenant
Defeasance of Indenture."
"Designated Senior Indebtedness" means (a) all Senior Indebtedness
outstanding under the New Credit Agreement and (b) any other Senior
Indebtedness which, at the time of determination, is specifically designated
in the instrument governing such Senior Indebtedness as "Designated Senior
Indebtedness" by the Company.
"Designation" has the meaning set forth under "--Certain Covenants--
Limitation on Designations of Unrestricted Subsidiaries."
"Designation Amount" has the meaning set forth under "--Certain Covenants--
Limitation on Designations of Unrestricted Subsidiaries."
"DMC" means the David Manufacturing Company, an Iowa corporation, and a
wholly-owned subsidiary of the Company.
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"Domestic Subsidiary" means a Restricted Subsidiary organized under the laws
of the United States, any State or territory thereof or the District of
Columbia.
"Equity Offering" has the meaning set forth under "--Optional Redemption--
Optional Redemption upon Equity Offering."
"Event of Default" has the meaning set forth under "--Events of Default."
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"Existing Leases" means the Master Equipment Lease Agreement dated as of
June 7, 1994 by and between Keycorp Leasing Ltd. and the Company and the
Master Equipment Lease Agreement dated December 19, 1996 by and between Fleet
Capital Corporation and the Company.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction. Fair Market Value shall be determined
by the Board of Directors of the Company acting in good faith evidenced by a
board resolution thereof delivered to the Trustee.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the Issue Date and
are consistently applied.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantor" means each Domestic Subsidiary formed, created or acquired
before or after the Issue Date, required to become a Guarantor after the Issue
Date pursuant to "--Certain Covenants--Limitation on Guarantees by Restricted
Subsidiaries."
"Guarantor Senior Indebtedness" means, with respect to the Indebtedness of
any Guarantor, any such Indebtedness represented by a guarantee by such
Guarantor of any Senior Indebtedness.
"incur" has the meaning set forth in "--Certain Covenants--Limitation on
Indebtedness." "incurrence," "incurred" and "incurring" shall have the
meanings correlative to the foregoing.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payable and other
accrued current liabilities incurred in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of
such Person in connection with any letters of credit, bankers acceptance or
other similar credit transaction and in connection with any agreement to
purchase, redeem, exchange, convert or otherwise acquire for value any Capital
Stock of such Person, or any warrants, rights or options to acquire such
Capital Stock, now or hereafter outstanding (provided, that any future payment
obligations of the Company issued by the Company in accordance with the
Stockholder Agreements shall not be "Indebtedness" hereunder, if such
obligations are expressly subordinated to the Notes; and provided, further,
that no cash payments may be
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made by the Company in respect of such future payment obligations to the
extent such payments do not violate the limitations set forth in "--Limitation
on Restricted Payments"), (ii) all obligations of such Person evidenced by
bonds, notes, debentures or other similar instruments, (iii) all indebtedness
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even if the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
trade accounts payable arising in the ordinary course of business, (iv) all
Capitalized Lease Obligations of such Person, (v) all Indebtedness referred to
in the preceding clauses of other Persons and all dividends of other Persons,
the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or
become liable for the payment of such Indebtedness (the amount of such
obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (vi) all guarantees of
Indebtedness by such Person, provided, however, that any such guarantee shall
not be deemed Indebtedness unless the Company shall have received a demand for
payment thereunder and the Company shall have failed to make such payment
within ten business days of the date required for payment, (vii) all
Redeemable Capital Stock valued at the greater of its voluntary or involuntary
maximum fixed repurchase price plus accrued and unpaid dividends, (viii) all
obligations under or in respect of Currency Agreements and Interest Rate
Protection Obligations of such Person, and (ix) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of
the types referred to in clauses (i) through (viii) above. For purposes
hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock
which does not have a fixed repurchase price will be calculated in accordance
with the terms of such Redeemable Capital Stock as if such Redeemable Capital
Stock were purchased on any date on which Indebtedness will be required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the Fair Market Value of such Redeemable Capital Stock, such Fair
Market Value is to be determined in good faith by the Board of Directors of
the issuer of such Redeemable Capital Stock.
"Independent Financial Advisor" means an accounting, appraisal or investment
banking firm (i) which does not, and whose directors, officers and employees
or Affiliates do not have, a direct or indirect financial interest in the
Company and (ii) which, in the judgment of the Board of Directors of the
Company, is otherwise independent and qualified to perform the task for which
it is to be engaged.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
Person calculated by applying a fixed or a floating rate of interest on the
same notional amount or any other arrangement involving payments by or to such
Person based upon fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan or other extension of credit (including by means of a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others or otherwise), or any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by any other Person. Investments shall exclude extensions
of trade credit on commercially reasonable terms in accordance with the
Company's normal trade practices. In addition to the foregoing, any foreign
exchange contract, currency swap, Interest Rate Protection Obligation or
similar agreement shall constitute an Investment.
"Issue Date" means the original issue date of the Old Notes under the
Indenture.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
privilege, security interest, hypothecation, cessation and transfer, lease of
real property, assignment for security, claim, deposit arrangement, or
preference or priority or other encumbrance upon or with respect to any
property of any kind, whether real, Personal or mixed, movable or immovable,
now owned or hereafter acquired. A Person will be deemed to own
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subject to a Lien any property it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
"Material Subsidiary" means any Restricted Subsidiary of the Company that is
a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the
Securities Act (as such regulation is in effect on the Issue Date).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary) net of (i)
brokerage commissions and other reasonable fees and expenses (including fees
and expenses of legal counsel and investment bankers) related to such Asset
Sale, (ii) provisions for all taxes payable as a result of such Asset Sale,
(iii) amounts required to be paid to any Person (other than the Company or any
Restricted Subsidiary) owning a beneficial interest in or having a Lien on the
assets subject to the Asset Sale and (iv) appropriate amounts to be provided
by the Company or any Restricted Subsidiary, as the case may be, as a reserve
required in accordance with GAAP consistently applied against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"New Credit Agreement" means the Credit Agreement between the Company and
LaSalle National Bank, as in effect on the Issue Date, and as such agreement
may be amended, renewed, extended, substituted, refinanced, replaced,
supplemented or otherwise modified from time to time, and includes (a) related
notes, guarantees and other agreements executed in connection therewith and
(b) any agreement (i) extending the maturity of all or any portion of the
Indebtedness thereunder, (ii) adding additional borrowers or guarantors
thereunder and (iii) increasing the amount to be borrowed thereunder;
provided, however, that in the case of clauses (i), (ii) and (iii), any such
agreement is not prohibited by the Indenture.
"Note Guarantee" means a guarantee by a Guarantor of the Notes and the
Company's obligations under the Indenture.
"Pari Passu Indebtedness" means any Indebtedness of the Company or any
Guarantor ranking pari passu in right of payment with the Notes or the Note
Guarantee of such Guarantor, as applicable.
"Permitted Holders" means Craig Sloan, Jorge Andrade, John W. Funk and
Howard G. Buffett or their successors and assigns who are Affiliates of the
Permitted Holders, members of their families and their heirs or executors.
"Permitted Indebtedness" has the meaning set forth under "--Certain
Covenants--Limitation on Indebtedness."
"Permitted Investments" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease,
utility and workers' compensation, performance and other similar deposits; (c)
loans and advances to employees made in the ordinary course of business not to
exceed $250,000 in the aggregate at any one time outstanding; (d) Interest
Rate Protection Obligations and Currency Agreements; and (e) Investments not
to exceed $15.0 million in the aggregate outstanding at any time.
"Permitted Tax Payments" has the meaning set forth under "--Certain
Covenants--Limitations on Restricted Payments."
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
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"Preferred Stock" means, with respect to any Person, Capital Stock of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over
Capital Stock of any other class of such Person.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property,
plant or equipment, provided that the aggregate principal amount of such
Indebtedness does not exceed the lesser of the Fair Market Value of such
property or such purchase price or cost.
"Redeemable Capital Stock" means any class or series of Capital Stock to the
extent that, either by its terms, by the terms of any security into which it
is convertible or exchangeable, or by contract or otherwise, is or upon the
happening of an event or passage of time would be, required to be redeemed
prior to the final Stated Maturity of the Notes or is redeemable at the option
of the holder thereof at any time prior to such Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
Stated Maturity, provided the Capital Stock subject to the Stockholder
Agreements shall not be deemed Redeemable Capital Stock.
"Reference Period" has the meaning set forth under the definition of
"Consolidated Fixed Charge Coverage Ratio."
"Refinance" means, with respect to any Indebtedness, any refinancing,
redemption, retirement, renewal, substitution, replacement, extension or
refunding of such Indebtedness.
"Restricted Payment" has the meaning set forth under "--Certain Covenants--
Limitation on Restricted Payments."
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a board
resolution delivered to the Trustee, as an Unrestricted Subsidiary pursuant to
and in compliance with the covenant described under "--Certain Covenants--
Limitation on Designations of Unrestricted Subsidiaries." Any such designation
may be revoked by a board resolution of the Board of Directors of the Company
delivered to the Trustee, subject to the provisions of such covenant.
"Revocation" has the meaning set forth under "--Certain Covenants--
Limitation on Designations of Unrestricted Subsidiaries."
"Securities Act" mean the Securities Act of 1933, as amended, and the rules
and regulations promulgated by the Commission thereunder.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on any Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to any Indebtedness of the Company. Without
limiting the generality of the foregoing, "Senior Indebtedness" will include
(a) the principal of, premium, if any, and interest (including interest that
would accrue but for the filing of a petition initiating any proceeding under
any state or federal bankruptcy laws, whether or not such claim is allowable
in such proceeding) on all obligations of every nature of the Company from
time to time owed to the lenders under the New Credit Agreement, including,
without limitation, principal of and interest on, and all fees and expenses
payable under the New Credit Agreement and (b) amounts owing under the
Existing Leases. Notwithstanding the foregoing, "Senior Indebtedness" shall
not include, to the extent constituting Indebtedness, (i) Indebtedness
evidenced by the Notes, (ii) Indebtedness that is subordinate or junior in
right of payment to any Indebtedness of
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the Company, (iii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company, (iv) Indebtedness which is represented by Redeemable
Capital Stock, (v) Indebtedness for goods, materials or services purchased in
the ordinary course of business or Indebtedness consisting of trade payables
or other current liabilities (other than any current liabilities owing under
the New Credit Agreement or the current portion of any long-term Indebtedness
which would constitute Senior Indebtedness but for the operation of this
clause (v)), (vi) Indebtedness of or amounts owed by the Company for
compensation to employee or for services rendered to the Company, (vii) any
liability for federal, state, local or other taxes owed or owing by the
Company, (viii) Indebtedness of the Company to a Subsidiary of the Company,
(ix) that portion of any Indebtedness which at the time of issuance is issued
in violation of the Indenture and (x) any obligation to purchase Capital Stock
under the Stock Purchase Agreements.
"Stated Maturity" means, with respect to any Note or any installment of
interest thereon, the dates specified in such Note as the fixed date on which
the principal of such Note or such installment of interest is due and payable,
and when used with respect to any other Indebtedness, means the date specified
in the instrument governing such Indebtedness as the fixed date on which the
principal of such Indebtedness or any installment of interest is due and
payable.
"Stockholder Agreements" means each of the Stock Restriction and Buy-Sell
Agreements, made as of June 6, 1996 by and between each of the Permitted
Holders and the Company with respect to the Company's voting Capital Stock, as
amended, and the Stock Restriction and Buy-Sell Agreement made as of January
1, 1997 among the Company, the Permitted Holders and other persons named
therein with respect to the Company's non-voting Capital Stock, as amended.
"Subordinated Indebtedness" means, with respect to the Company, Indebtedness
of the Company which is expressly subordinated in right of payment to the
Notes or, with respect to any Guarantor, Indebtedness of such Guarantor which
is expressly subordinated in right of payment to the Note Guarantee of such
Guarantor.
"Subsidiary" means, with respect to any Person, (a) any corporation of which
the outstanding shares of Voting Stock having at least a majority of the votes
entitled to be cast in the election of directors shall at the time be owned,
directly or indirectly, by such Person, or (b) any other Person of which at
least a majority of the shares of Voting Stock are at the time, directly or
indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in any
consolidation or merger, or any sale, assignment, conveyance, transfer, lease
or other disposition of all or substantially all of its properties and assets
as an entirety, the Person formed by or surviving such merger or consolidation
or the Person to which such sale, assignment, conveyance, transfer or lease is
made.
"Tax Amount" means, with respect to any period, without duplication, the
amount of taxable income of any Person attributable to the income of the
Company and its Restricted Subsidiaries for such period multiplied by the
highest marginal combined federal, state and local tax rates applicable to
individuals during such period.
"Transaction Date" has the meaning set forth under the definition of
"Consolidated Fixed Charge Coverage Ratio".
"Unrestricted Subsidiary" means a Subsidiary of the Company (other than a
Guarantor) designated as such pursuant to and in compliance with the covenant
described under "--Certain Covenants--Limitation on Designations of
Unrestricted Subsidiaries." Any such designation may be revoked by a Board
Resolution of the Company delivered to the Trustee, subject to the provisions
of such covenant.
"Unutilized Net Available Proceeds" has the meaning set forth under "--
Certain Covenants--Disposition of Proceeds of Asset Sales."
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"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the Board of Directors, managers or trustees
of any Person (irrespective of whether or not, at the time, stock of any other
class or classes shall have, or might have, voting power by reason of the
happening of any contingency).
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary of
which 100% of the outstanding Capital Stock is owned by the Company and/or
another Wholly-Owned Restricted Subsidiary. For purposes of this definition,
any directors' qualifying shares shall be disregarded in determining the
ownership of a Restricted Subsidiary.
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BOOK-ENTRY; DELIVERY AND FORM
The Old Notes offered and sold to qualified institutional buyers (as defined
under Rule 144A) ("QIBs") were each registered in book-entry form, are
represented by a global note in fully registered form without interest
coupons, which was deposited with the Trustee as custodian for DTC and
registered in the name of Cede & Co. or such other nominee as DTC may
designate.
The Old Notes offered and sold to persons outside the United States who
received such Old Notes pursuant to sales in accordance with Regulation S were
each initially represented by a global note certificate in fully registered
form without interest coupons (the "Offshore Global Old Note"). The Offshore
Global Old Note was deposited with the Trustee as custodian for DTC and
registered in the name of Cede & Co. Prior to the expiration of the "40-day
restricted period" within the meaning of Rule 903 of Regulation S, transfers
of interest in the Offshore Global Old Note were only effected through records
maintained by DTC, Cedel Bank, societe anonyme ("Cedel") or Euroclear System
("Euroclear").
The certificates representing the New Notes will be issued in fully
registered form without interest coupons. Except as described below, the New
Notes will be deposited with, or on behalf of, DTC, and registered in the name
of Cede & Co as DTC's nominee, in the form of a global New Note certificate
(the "Global New Note") or will remain in the custody of the Trustee pursuant
to the FAST Balance Certificate between DTC and the Trustee.
Holders of New Notes who elect to take physical delivery of their
certificates instead of holding their interest through the Global New Note
(collectively referred to herein as the "Non-Global Holders") will be issued
in registered form a certificated New Note ("Certificated New Note"). Upon the
transfer of any Certificated New Note initially issued to a Non-Global Holder,
such Certificated New Note will, unless the transferee requests otherwise or
the Global New Note has previously been exchanged in whole for Certificated
New Notes, be exchanged for an interest in the Global New Note.
THE GLOBAL NEW NOTE. The Company expects that, pursuant to procedures
established by DTC, (a) upon deposit of the Global New Note, DTC or its
custodian will credit on its internal system the principal amount at maturity
of New Notes of the individual beneficial interests represented by such Global
New Note to the respective accounts of persons who have accounts with DTC and
(b) ownership of beneficial interests in the Global New Note will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by DTC or its nominee (with respect to interests of Participants
(as defined herein)) and the records of Participants (with respect to
interests of persons other than Participants). Ownership of beneficial
interests in the Global New Note will be limited to persons who have accounts
with DTC ("Participants") or persons who hold interests through Participants.
QIBs may hold their interests in the Global New Note directly through DTC if
they are Participants in such system, or indirectly through organizations
which are Participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the New
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner and holder of the New Notes represented by such Global New Note for all
purposes under the Indenture. No beneficial owner of an interest in the Global
New Note will be able to transfer such interest except in accordance with
DTC's procedures, in addition to those provided for under the Indenture with
respect to the New Notes.
Payments of the principal of or premium and interest on the Global New Note
will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of the Company, the Trustee or any paying agent under the
Indenture will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global New Note or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of or premium and interest on the Global New Note, will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global New
Note as shown on the records
91
<PAGE>
of DTC or its nominee. The Company also expects that payments by Participants
to owners of beneficial interests in the Global New Note held through such
Participants will be governed by standing instructions and customary practice
as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such Participants.
Transfers between Participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in federal funds. If a holder requires physical delivery of a
Certificated New Note for any reason, including to sell New Notes to persons
in states that require physical delivery of the New Notes or to pledge such
securities, such holder must transfer its interest in the Global New Note in
accordance with normal procedures of DTC and with the procedures set forth in
the Indenture.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of New Notes (including the presentation of New Notes for
exchange as described below) only at the direction of one or more Participants
to whose account the DTC interests in the Global New Note are credited and
only in respect of such portion of the aggregate principal amount of New Notes
as to which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Indenture, DTC will
exchange the Global New Note for Certificated New Notes, which it will
distribute to its Participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Although DTC, Euroclear and Cedel are expected to follow the foregoing
procedures in order to facilitate transfers of interest in the Global New
Notes among Participants of DTC, they are under no obligation to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Company nor the Trustee will have any responsibility for the performance by
DTC, Euroclear and Cedel or the Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
CERTIFICATED NEW NOTES. Interests in the Global New Note will be
exchangeable or transferable, as the case may be, for Certificated Notes if
(i) DTC notifies the Company that it is unwilling or unable to continue as
depositary for such Global New Note, or DTC ceases to be a "Clearing Agency"
registered under the Exchange Act, and a successor depositary is not appointed
by the Company within 90 days, or (ii) an Event of Default has occurred and is
continuing with respect to such New Notes. Upon the occurrence of any of the
events described in the preceding sentence, the Company will cause the
appropriate Certificated New Notes to be delivered.
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement with the Initial Purchasers,
the Company agreed to file with the Commission the Exchange Offer Registration
Statement of which this Prospectus is a part on an appropriate form under the
Securities Act with respect to an offer to exchange the Old Notes for the New
Notes. Upon the effectiveness of the Exchange Offer Registration Statement,
the Company will offer to the holders of Old Notes who are able to make
certain representations the opportunity to exchange their Old Notes for New
Notes. If (i) the Company is not permitted to file the Exchange Offer
Registration Statement or to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission policy, (ii)
the Exchange Offer is not for any other reason consummated within 180 days
after the Issue Date, (iii) any holder of Old Notes
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<PAGE>
notifies the Company within a specified time period that (a) due to a change
in applicable law or Commission policy it is not entitled to participate in
the Exchange Offer, (b) due to a change in applicable law or Commission policy
it may not resell the New Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such holder or (c) it is a broker-dealer and owns Old Notes
acquired directly from the Company or (iv) the holders of a majority of the
Old Notes may not resell the New Notes to be acquired by them in the Exchange
Offer to the public without restriction under the Securities Act and without
restriction under applicable blue sky or state securities laws, the Company
will file with the Commission the Shelf Registration Statement to cover
resales of the Transfer Restricted Notes (as defined herein) by the holders
thereof. The Company will use its best efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
Commission. For purposes of the foregoing, "Transfer Restricted Notes" means
each Old Note until (i) the date on which such Old Note has been exchanged by
a person other than a broker-dealer for a New Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of an Old Note
for a New Note, the date on which such New Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy
of the prospectus contained in the Exchange Offer Registration Statement,
(iii) the date on which such Old Note has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf Registration
Statement, (iv) the date on which such Old Note is distributed to the public
pursuant to Rule 144(k) under the Securities Act (or any similar provision
then in force, but not Rule 144A under the Securities Act), (v) such Old Note
shall have been otherwise transferred by the holder thereof and a New Note not
bearing a legend restricting further transfer shall have been delivered by the
Company and subsequent disposition of such Old Note shall not require
registration or qualification under the Securities Act or any similar state
law then in force or (vi) such Old Note ceases to be outstanding.
Under existing Commission interpretations, the New Notes would, in general,
be freely transferable after the Exchange Offer without further registration
under the Securities Act; provided, that in the case of broker-dealers
participating in the Exchange Offer, a prospectus meeting the requirements of
the Securities Act must be delivered upon resale by such broker-dealers in
connection with resales of the New Notes. The Company has agreed, for period
of 180 days after consummation of the Exchange Offer, to make available a
prospectus meeting the requirements of the Securities Act to any such broker-
dealer for use in connection with any resale of any New Notes acquired in the
Exchange Offer. A broker-dealer who delivers such a prospectus to purchasers
in connection with such resales will be subject to certain of the civil
liability provisions under the Securities Act and will be bound by the
provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
Each holder of Old Notes who wishes to exchange such Old Notes for New Notes
in the Exchange Offer will be required to make certain representations,
including representations that: (i) the holder is not an "affiliate" of the
Company as defined in Rule 405 of the Securities Act, (ii) the holder is not a
broker-dealer that acquired Old Notes directly from the Company in order to
resell them pursuant to Rule 144A of the Securities Act or any other available
exemption under the Securities Act, (iii) the holder will acquire the New
Notes in the ordinary course of business and (iv) the holder is not
participating, and does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes.
If the holder is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes that were acquired as a result of market-
making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.
The Company has agreed to pay all expenses incident to the Exchange Offer
and will indemnify the Initial Purchasers against certain liabilities,
including liabilities under the Securities Act.
The Registration Rights Agreement provides that (i) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, the
Company will use its best efforts to file the Exchange Offer Registration
Statement with the Commission on or prior to 90 days after the Issue Date,
(ii) unless the Exchange
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<PAGE>
Offer would not be permitted by applicable law or Commission policy, the
Company will use its best efforts to have the Exchange Offer Registration
Statement declared effective by the Commission on or prior to 150 days after
the Issue Date, (iii) unless the Exchange Offer would not be permitted by
applicable law or Commission policy, the Company will use its best efforts to
have the Exchange Offer Registration Statement remain effective until the
closing of the Exchange Offer, (iv) unless the Exchange Offer would not be
permitted by applicable law or Commission policy, the Company will commence
the Exchange Offer and use its best efforts to issue, on or prior to 180 days
after the Issue Date, New Notes in exchange for all Old Notes tendered prior
thereto in the Exchange Offer and (v) if obligated to file the Shelf
Registration Statement, the Company will use its best efforts to file the
Shelf Registration Statement prior to the later of (a) 120 days after the
Issue Date or (b) 30 days after such filing obligation arises and use its best
efforts to cause the Shelf Registration Statement to be declared effective by
the Commission on or prior to 60 days after such obligation arises; provided,
that if the Company has not consummated the Exchange Offer within 180 days of
the Issue Date, then the Company will file the Shelf Registration Statement
with the Commission on or prior to the 181st day after the Issue Date. The
Company shall use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended until the second anniversary
of the Issue Date or such shorter period that will terminate when all the
Transfer Restricted Notes covered by the Shelf Registration Statement have
been sold pursuant thereto. A holder of Old Notes who intends to sell such Old
Notes pursuant to the Shelf Registration Statement will be required to be
named as a selling securityholder in the related prospectus and to deliver
such prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales
and will be bound by the provisions of the Registration Rights Agreement
applicable to such holder (including certain indemnification and contribution
obligations).
If (i) the Company fails to file any of the registration statements required
by the Registration Rights Agreement on or before the date specified for such
filing, (ii) any of such registration statements are not declared effective by
the Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), subject to certain limited exceptions, (iii) the
Company fails to consummate the Exchange Offer within 30 days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter, subject to
certain limited exceptions, ceases to be effective or usable in connection
with the Exchange Offer or resales of Transfer Restricted Notes, as the case
may be, during the periods specified in the Registration Rights Agreement
(each such event referred to in clauses (i) through (iv) above, a
"Registration Default"), then the interest rate on the Transfer Restricted
Notes will accrue at a rate per annum equal to an additional one quarter of
one percent (0.25%) of the principal amount of the Notes upon the occurrence
of each Registration Default, which rate will increase by one quarter of one
percent (0.25%) each 90-day period that such Additional Interest continues to
accrue under any such circumstance, with an aggregate maximum increase in the
interest rate equal to one percent (1%) per annum. Following the cure of all
Registration Defaults, the accrual of additional interest will cease and the
interest rate will revert to the original rate.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy which is filed as an exhibit to the Registration Statement
of which this Prospectus forms a part.
94
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations of the issuance of New Notes and the Exchange Offer. This
summary does not discuss all aspects of federal income taxation that may be
relevant to particular holders of Note, especially in light of a holder's
personal investment circumstances, or to certain types of holders subject to
special treatment under the federal income tax laws (for example, life
insurance companies, tax-exempt organizations and foreign corporations and
individuals who are not citizens or residents of the United States) and does
not discuss any aspects of state, local or foreign taxation. This discussion
is limited to those holders who will hold the Notes as "capital assets"
(generally, property held for investment) within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the "Code").
This summary is based upon laws, regulations, rulings and decisions now in
effect and upon proposed regulations, all of which are subject to change
(possibly with retroactive effect) by legislation, administrative action or
judicial decision.
EXCHANGE OFFER. The exchange of Old Notes for New Notes pursuant to the
Exchange Offer should not be treated as a taxable "exchange" because the New
Notes should not be considered to differ materially in kind or extent from the
Old Notes. Rather, the New Notes received by a holder of the Old Notes should
be treated as a continuation of the Old Notes in the hands of such holder. As
a result, there should be no gain or loss to holders exchanging the Old Notes
for the New Notes pursuant to the Exchange Offer.
INTEREST. A holder will be required to include in gross income the stated
interest on the Old Notes or the New Notes in accordance with the holder's
method of tax accounting.
TAX BASIS. Generally, a holder's tax basis in an Old Note will initially be
the holder's purchase price for the Old Note and will be decreased by the
amount of any principal payments received. If a holder exchanges an Old Note
for a New Note pursuant to the Exchange Offer, the tax basis of the New Note
immediately after such exchange should equal the holder's tax basis in the Old
Note immediately prior to the exchange.
SALE OR REDEMPTION. The sale, exchange, redemption or other disposition of
an Old Note or a New Note (other than pursuant to the Exchange Offer)
generally will be a taxable event. A holder generally will recognize gain or
loss equal to the difference between (i) the amount of cash plus the fair
market value of any property received upon such sale, exchange, redemption or
other taxable disposition of an Old Note or a New Note (other than in respect
of accrued interest thereon) and (ii) the holder's adjusted tax basis in such
Old Note or New Note. Such gain or loss generally will be capital gain or
loss, provided that the holder has held the Note as a capital asset. The
recently enacted Taxpayer Relief Act of 1997 made certain changes to the Code
with respect to taxation of capital gains of taxpayers other than
corporations. In general, the maximum tax rate for non-corporate taxpayers on
long-term capital gains has been lowered to 20% from the previous 28% rate for
most capital assets (including the Old or New Notes) held for more than 18
months. For taxpayers in the 15% regular tax bracket, the maximum tax rate on
long-term capital gains in now 10%. Capital gain on such assets for non-
corporate holders having a holding period of more than one year but not more
than 18 months will be subject to a maximum tax rate of 28%. The holding
period of each New Note would include the holding period of the Old Notes
exchanged therefor.
PURCHASERS OF NOTES AT OTHER THAN ORIGINAL ISSUANCE. The foregoing summary
does not discuss special rules which may affect the treatment of purchasers
that acquire Notes other than at original issuance, including those provisions
of the Code relating to the treatment of "market discount" and "acquisition
premium." Any such Purchaser should consult its tax advisor as to the
consequences to him of the acquisition, ownership and disposition of Old Notes
and the New Notes.
BACKUP WITHHOLDING. Unless a holder or other payee provides its correct
taxpayer identification number (employer identification number or social
security number) to the Company (as payor) and certifies that such number is
correct, under the federal income tax backup withholding rules, generally 31%
of (1) the interest paid
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<PAGE>
on the Notes, and (2) proceeds of sale or other disposition of the Notes must
be withheld and remitted to the United States Department of the Treasury.
Therefore, each holder should complete and sign the Substitute Form W-9
included so as to provide the information and certification necessary to avoid
backup withholding. However, certain exchanging holders (including, among
others, certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt foreign recipient, that exchanging holder must submit a
statement, signed under penalties of perjury, attesting to that individual's
exempt foreign status.
Withholding is not an additional federal income tax. Rather, the federal
income tax liability of a person subject to withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
THE FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY. EACH
HOLDER OF NOTES OR NEW NOTES SHOULD CONSULT SUCH HOLDER'S TAX ADVISOR AS TO
THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE EXCHANGE OFFER, INCLUDING
THE APPLICATION OF AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
96
<PAGE>
PLAN OF DISTRIBUTION
Pursuant to the Exchange Offer, each Participating Broker-Dealer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. This Prospectus may be used by a Participating Broker-Dealer
in connection with resales of New Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. The Company has agreed that it will make this
Prospectus available to any Participating Broker-Dealer for use in connection
with any such resale and Participating Broker-Dealers shall be authorized to
deliver this Prospectus for a period not exceeding 180 days after the
Expiration Date.
The Company will not receive any proceeds from any sales of the New Notes by
Participating Broker-Dealers. New Notes received by Participating Broker-
Dealers for their own account pursuant to the Exchange Offer may be sold from
time to time, in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the New Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from such Participating Broker-Dealer or the purchasers of any
such New Notes. Any broker-dealer that resells New Notes that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
The Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any Participating Broker-Dealer
that reasonably requests such documents in the Letter of Transmittal. See "The
Exchange Offer."
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
Notes offered hereby will be passed upon for the Company by Mayer, Brown &
Platt, Chicago, Illinois.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1995
and 1996 and for the years ended December 31, 1994, 1995 and 1996, included in
this Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their report appearing herein.
The balance sheet of DMC as of October 31, 1996, and the statements of
income, stockholders' equity and cash flows for the year then ended included
herein and elsewhere in this Prospectus, have been audited by McGladrey &
Pullen, LLP, independent public accountants, as stated in their report
appearing herein and are included herein in reliance and upon the authority of
said firm as experts in giving said reports.
In 1996, for business reasons, the Company's Board of Directors approved the
dismissal of Arthur Andersen LLP, which had been the Company's principal
accounting firm for fiscal 1992 through fiscal 1995, and the appointment of
Geo. S. Olive & Co., LLC. Following the completion of the 1996 audit, the
Board approved the reappointment of Arthur Andersen LLP as the Company's
principal accounting firm. None of the reports on the Company's financial
statement prepared by either Arthur Andersen LLP or Geo. S. Olive & Co., LLC
contained an adverse opinion or a disclaimer of opinion, or were qualified or
modified as to uncertainty, audit scope or accounting principles. There were
no disagreements with either Arthur Andersen LLP or Geo. S. Olive & Co., LLC
on any matter of accounting principles or practices, financial statement
disclosures or auditing scope or procedure through the date of its dismissal.
97
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
THE GSI GROUP, INC. AND SUBSIDIARIES
Audited Consolidated Financial Statements:
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996............. F-3
Consolidated Statements of Income for the years ended December 31, 1994,
1995 and 1996........................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994, 1995 and 1996........................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996..................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of December 31, 1996 and
September 30, 1997...................................................... F-15
Condensed Consolidated Statements of Income for the nine months ended
September 30, 1996 and 1997............................................. F-16
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1996 and 1997............................................. F-17
Notes to Condensed Consolidated Financial Statements..................... F-18
DAVID MANUFACTURING CO.
Independent Auditor's Report............................................. F-20
Balance Sheets as of October 31, 1996 and as of September 30, 1997
(unaudited)............................................................. F-21
Statements of Income for the year ended October 31, 1996 and for the
eleven months ended
September 30, 1997 and 1996 (unaudited)................................. F-22
Statements of Stockholders' Equity for the year ended October 31, 1996
and for the eleven months ended September 30, 1997 (unaudited).......... F-23
Statements of Cash Flows for the year ended October 31, 1996 and for the
eleven months ended September 30, 1997 and 1996 (unaudited)............. F-24
Notes to Financial Statements............................................ F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
The GSI Group, Inc.:
We have audited the accompanying consolidated balance sheets of The GSI
Group, Inc. and subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The GSI
Group, Inc. and subsidiaries as of December 31, 1995 and 1996, and the results
of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
October 15, 1997
F-2
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ASSETS 1995 1996
------ ------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents.................................. $ 938 $ 1,490
Net assets of discontinued business........................ 8,464 --
Accounts receivable, net................................... 11,879 18,453
Inventories, net........................................... 17,795 19,805
Current portion of notes receivable........................ 559 154
Other...................................................... 812 3,736
------- --------
Total current assets..................................... 40,447 43,638
Notes Receivable, less current portion....................... 2,681 1,127
Property, Plant and Equipment, net........................... 22,075 22,106
Other Assets................................................. 1,218 701
------- --------
Total assets............................................. $66,421 $ 67,572
======= ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable........................................... $ 9,249 $ 7,071
Dividend payable........................................... -- 5,526
Accrued expenses........................................... 4,889 8,558
Customer deposits.......................................... 5,466 3,892
Note payable to bank....................................... 10,797 --
Current maturities of long-term debt....................... 1,961 3,339
------- --------
Total current liabilities................................ 32,362 28,386
------- --------
Long-Term Debt, less current maturities...................... 21,172 44,567
------- --------
Stockholders' Equity:
Common stock, $.01 par value, voting (authorized 2,000,000
shares--1995, 6,900,000 shares--1996; issued--1,800,000
shares--1995, 1,800,000 shares--1996)..................... 18 18
Common stock, $.01 par value, non-voting (authorized
200,000 shares--1995, 1,100,000 shares--1996; issued--no
shares--1995, 200,000 shares--1996)....................... -- 2
Paid-in capital............................................ 182 2,473
Retained earnings.......................................... 12,687 17,659
Treasury stock, at cost.................................... -- (25,533)
------- --------
Total stockholders' equity (deficit)..................... 12,887 (5,381)
------- --------
Total liabilities and stockholders' equity............... $66,421 $ 67,572
======= ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-3
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales..................................... $ 130,852 $ 141,191 $ 178,537
Cost of sales................................. 106,037 115,004 135,696
--------- --------- ---------
Gross profit.............................. 24,815 26,187 42,841
Selling, general and administrative expenses.. 19,497 22,176 28,787
--------- --------- ---------
Operating income.......................... 5,318 4,011 14,054
Other income (expense):
Write-off of affiliate receivable........... -- (3,423) --
Interest expense............................ (1,934) (2,894) (3,590)
Other, net.................................. 461 548 517
--------- --------- ---------
Income (loss) before discontinued
operation and extraordinary item......... 3,845 (1,758) 10,981
Discontinued operation:
Loss from operations of discontinued
business................................... (554) (2,562) --
Gain (loss) on sale of discontinued
business................................... -- 2,842 (482)
--------- --------- ---------
Income (loss) before extraordinary item... 3,291 (1,478) 10,499
Extraordinary item:
Loss on early extinguishment of debt........ (279) -- --
--------- --------- ---------
Net income (loss)......................... $ 3,012 $ (1,478) $ 10,499
========= ========= =========
Earnings per share:
Continuing operations....................... $ 2.14 $ (0.98) $ 5.78
Discontinued operations..................... (0.31) .16 (0.25)
Extraordinary item.......................... (0.16) -- --
--------- --------- ---------
Net income (loss)......................... $ 1.67 $ (0.82) $ 5.53
========= ========= =========
Weighted average common and common equivalent
shares outstanding........................... 1,800,000 1,800,000 1,900,000
========= ========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-4
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
--------------------------------- ----------------------------------
VOTING NONVOTING VOTING NONVOTING
------------------ -------------- ADDITIONAL ------------------ -------------- TOTAL
SHARES SHARES PAID-IN RETAINED STOCKHOLDERS'
ISSUED AMOUNT ISSUED AMOUNT CAPITAL EARNINGS SHARES AMOUNT SHARES AMOUNT EQUITY
---------- ------ ------- ------ ---------- -------- --------- -------- ------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December
31, 1993.......... 750 $-- -- $-- 200 $12,905 -- $ -- -- $-- $13,105
Dividends.......... -- -- -- -- -- (1,752) -- -- -- -- (1,752)
Net income......... -- -- -- -- -- 3,012 -- -- -- -- 3,012
---------- ---- ------- ---- ------ ------- --------- -------- ------- ---- -------
Balance, December
31, 1994.......... 750 -- -- -- 200 14,165 -- -- -- -- 14,365
Stock exchange and
recapitalization--
Stock issue
retired.......... (750) -- -- -- (200) -- -- -- -- -- (200)
New stock issue... 1,800,000 18 -- -- 182 -- -- -- -- -- 200
Net loss........... -- -- -- -- -- (1,478) -- -- -- -- (1,478)
---------- ---- ------- ---- ------ ------- --------- -------- ------- ---- -------
Balance, December
31, 1995.......... 1,800,000 18 -- -- 182 12,687 -- -- -- -- 12,887
Treasury stock
purchased........ (1,460,158) (15) -- -- 15 -- 1,460,158 (25,490) -- -- (25,490)
Stock split--
Voting common
stock.......... 785,158 8 -- -- 26 -- 3,373,494 (34) -- -- --
Non-voting
common stock... -- -- 200,000 2 7 -- -- -- 859,316 (9) --
Stock sold
pursuant to four
purchase
agreements....... 675,000 7 -- -- 2,243 -- -- -- -- -- 2,250
Net income........ -- 10,499 10,499
Dividends......... -- -- -- -- -- (5,527) -- -- -- -- (5,527)
---------- ---- ------- ---- ------ ------- --------- -------- ------- ---- -------
Balance, December
31, 1996.......... 1,800,000 $ 18 200,000 $ 2 $2,473 $17,659 4,833,652 $(25,524) 859,316 $ (9) $(5,381)
========== ==== ======= ==== ====== ======= ========= ======== ======= ==== =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
-------- ------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)............................... $ 3,012 $(1,478) $ 10,499
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating
activities--
Depreciation and amortization................. 2,679 3,351 3,153
(Gain) loss on sales of equipment............. 34 30 (349)
Write-off of affiliate receivable............. -- 3,423 --
(Gain) loss on sale of discontinued business.. -- (2,843) 482
Changes in assets and liabilities--
Accounts receivable......................... (5,149) (4,071) (7,056)
Inventories................................. (3,946) (453) (2,010)
Other current assets........................ (292) (279) (2,924)
Accounts payable............................ 2,127 3,027 (2,178)
Accrued expenses............................ 1,305 60 3,669
Other....................................... 1,720 1,681 (1,575)
-------- ------- --------
Net cash flows provided by (used in)
operating activities....................... 1,490 2,448 1,711
-------- ------- --------
Cash Flows from Investing Activities:
Capital expenditures............................ (10,907) (5,816) (3,834)
Proceeds from sale of discontinued business..... -- -- 7,982
Payments received on notes receivable........... -- -- 2,130
Other........................................... 117 439 1,998
-------- ------- --------
Net cash flows provided by (used in)
investing activities....................... (10,790) (5,377) 8,276
-------- ------- --------
Cash Flows from Financing Activities:
Proceeds from former shareholder loans, net..... -- 1,426 17,490
Proceeds from issuance of long-term debt........ 15,000 3,500 4,000
Payments on long-term debt...................... (8,211) (3,703) (2,511)
Net (payments) borrowings under line-of-credit
agreement...................................... 5,850 3,489 (4,773)
Proceeds from issuance of common stock.......... -- -- 2,250
Purchase of treasury stock...................... -- -- (25,490)
Dividends....................................... (1,752) -- --
Other........................................... (1,668) (868) (401)
-------- ------- --------
Net cash flows provided by (used in)
financing activities....................... 9,219 3,844 (9,435)
-------- ------- --------
Increase (Decrease) in Cash and Cash Equivalents.. $ (80) $ 915 $ 552
Cash and Cash Equivalents, beginning of year...... 103 23 938
-------- ------- --------
Cash and Cash Equivalents, end of year............ $ 23 $ 938 $ 1,490
======== ======= ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. NATURE OF OPERATIONS
The GSI Group, Inc. and its subsidiaries ( the "Company") manufacture grain
storage bins and accessories, swine and poultry confinement, ventilation and
feeding systems and poultry incubation systems and accessories used primarily
in the agricultural industry. The Company's headquarters and main
manufacturing facility is in Assumption, Illinois, with other facilities in
Illinois and North Carolina. In addition, the Company has operations in
Brazil, Malaysia, South Africa, The Netherlands and Mexico.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements includes the accounts of the Company
and its subsidiaries. All intercompany transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with original maturities of
three months or less when acquired to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost includes the
cost of materials, labor and factory overhead. The cost of those inventories
was determined on the last-in, first-out method. Had the inventories been
determined on the first-in, first-out method at December 31, 1995 and 1996,
the reported value of such inventories would have been increased by $2.8
million and $3.3 million, respectively.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. The cost of property, plant and equipment acquired as part of a
business acquisition represents the fair market value of such assets at the
acquisition date typically as determined by independent appraisal.
Depreciation is provided using the straight-line method by making periodic
charges to income over the estimated useful lives of the assets (5-10 years
for all property except for depreciable real property, which is depreciated
over 25 years).
Property, plant and equipment under capital leases are amortized over the
shorter of the estimated useful life of the asset or the term of the lease.
Maintenance and repairs are charged to expense as incurred, while major
replacements and improvements are capitalized. Maintenance and repair costs
were $2.7 million, $2.0 million and $2.1 million for the years ended
F-7
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
December 31, 1994, 1995 and 1996, respectively. The cost and accumulated
depreciation of items sold or retired are removed from the property accounts
and any gain or loss is recorded currently in the consolidated statements of
income.
Research and Development
Costs associated with research and development are expensed as incurred.
Such costs incurred were $1.1 million, $1.4 million and $1.2 million for the
years ended December 31, 1994, 1995 and 1996, respectively.
Intangible Assets
The excess of purchase costs over amounts allocated to identifiable assets
and liabilities of businesses acquired ("goodwill") is amortized on the
straight-line basis over 40 years. Should events or circumstances occur
subsequent to the acquisition of a business which bring into question the
realizable value or impairment of the related goodwill, the Company will
evaluate the remaining useful life and balance of goodwill and make
appropriate adjustments. The Company's principal considerations in determining
impairment include the strategic benefit to the Company of the particular
business as measured by undiscounted current and expected future operating
cash flows of that particular business and expected undiscounted cash flows.
Should an impairment be identified, a loss would be reported to the extent
that the carrying value of the related goodwill exceeds the fair value of that
goodwill as determined by valuation techniques available in the circumstances.
Revenue Recognition
Revenue on all products are recorded when products are completed and
shipped.
Translation of Foreign Currency
The Company translates the financial statements of its foreign subsidiaries
in accordance with Statement of Financial Accounting Standards ("SFAS") No.
52, "Foreign Currency Translation." The cumulative translation adjustment and
translation loss were immaterial to the consolidated financial statements.
Earnings Per Share
Earnings per common share are computed by dividing earnings by the weighted
average number of common shares outstanding during each period. See Note 6.
Income Taxes
Effective February 1988, an election was filed with the Internal Revenue
Service to have taxable income of the Company taxed to the individual owners
pursuant to S Corporation provisions of the Internal Revenue Code.
Accordingly, no provision for federal income taxes has been recorded.
Dividends sufficient to pay the resulting income taxes of the owners are
declared and paid as needed. The Company is responsible for certain state
taxes.
New Accounting Pronouncements
SFAS No. 128, "Earnings Per Share," was issued in February 1997 and will be
adopted by the Company effective January 1, 1998. This new pronouncement
establishes revised methods for computing and reporting earnings per share.
Adoption of this standard will not materially impact previously reported
earnings per share.
SFAS No. 130, "Reporting Comprehensive Income," was issued in July 1997 and
will be adopted by the Company effective January 1, 1998. This new
pronouncement establishes standards for reporting and display of
F-8
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
comprehensive income and its components. Adoption of this standard will not
impact the Company's financial position or results of operations.
Reclassification
Certain reclassifications have been made to prior-year amounts to conform to
the current-year presentation.
3. DISCONTINUED OPERATIONS
In 1995, in order to concentrate on its core businesses, the Company made a
decision to sell its Heritage Vinyl Products Division ("Division"). The
agreement to sell the Division was signed in December 1995 and the sale of the
Division closed on January 11, 1996. The sale of the net assets of the
Division resulted in net proceeds to the Company of $8.0 million. The gain on
the sale was $2.8 million. The Company restated 1994 consolidated financial
statements to present continuing operations and the discontinued operations of
the Division. A charge of $482,000 was recorded in 1996 to adjust certain
retained assets to net realizable value.
4. DETAIL OF CERTAIN ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Allowance for doubtful accounts...................... $ 620 $ 643
========= =========
</TABLE>
Inventories
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
---------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials............................................. $ 4,497 $ 3,605
Work-in-process........................................... 1,466 1,802
Finished goods............................................ 11,832 14,398
------- -------
Total................................................... $17,795 $19,805
======= =======
</TABLE>
Property, Plant and Equipment
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
---------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land..................................................... $ 472 $ 533
Buildings................................................ 11,650 12,565
Machinery................................................ 20,902 21,491
Furniture and fixtures................................... 4,036 4,132
Construction-in-progress................................. 241 1,022
------- -------
37,301 39,743
Accumulated depreciation................................. 15,226 17,637
------- -------
Property, plant and equipment, net....................... $22,075 $22,106
======= =======
</TABLE>
F-9
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
5. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid $2.0 million, $3.2 million and $2.8 million in interest
during the years ended December 31, 1994, 1995 and 1996, respectively.
6. COMMON STOCK
On December 12, 1995, the Company's Directors and stockholders approved an
amendment to the Certificate of Incorporation and a Stock Exchange and
Recapitalization Agreement. The Certificate of Incorporation was amended from
authorizing 10,000 shares, no par value, voting common stock to authorizing
2,000,000 shares, $.01 par value, voting common stock and 200,000 shares, $.01
par value, nonvoting common stock. Accordingly, the outstanding 750 shares, no
par value, voting common stock were replaced with 1,800,000 shares, $.01 par
value, voting common stock. For earnings per share computations, 1.8 million
shares is assumed to have been outstanding for 1995 and prior years.
On June 6, 1996, a special meeting of the Board of Directors of the Company
was convened to execute a series of stock transactions that changed its
ownership structure to better position the Company to execute the strategic
objectives of senior management. The significant components of the
transactions were as follows:
Stock Authorization--The Certificate of Incorporation was amended to
authorize 6,900,000 shares, $.01 par value, voting common stock and 1,100,000
shares, $.01 par value, nonvoting common stock.
Stock Redemption--The Company entered into Stock Redemption Agreements with
three of its stockholders to redeem their stock. The Company purchased, and
recorded as treasury stock 1,460,158 shares at a cost of $25.5 million.
Stock Split--The Company declared a stock split which resulted in the Chief
Executive Officer, the Company's sole stockholder at that time, receiving
200,000 shares of $.01 par nonvoting common stock and 785,158 shares of $.01
voting common stock.
Stock Purchase Agreements--Pursuant to Stock Purchase Agreements entered
into with the Chief Executive Officer, the Executive Vice President and Chief
Financial Officer, the Chief Operating Officer and President, and the Chairman
of the Board, such officers purchased an aggregate 675,000 shares of the
Company's $.01 voting common stock. In connection with this transaction, the
buyers executed Employment Agreements and Stock Restriction and Buy-Sell
Agreements that place certain restrictions on their ability to sell the
Company's stock.
On December 31, 1996, the Board of Directors declared a dividend of $2.76
per share, or $5.5 million.
F-10
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
7. LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995, consists of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
CIT note payable with interest at 9%, due $117 monthly
through April, 2000, secured by specific equipment and
by the joint and several personal guarantees of certain
stockholders........................................... $ 5,857 $ 4,594
Metropolitan Life Insurance Company note payable at
8.45% at December 31, 1995 and 9.45% at December 31,
1996, due $24 monthly plus interest with unpaid
principal due July, 2006, secured by a mortgage on real
property located in Assumption, Illinois, and by the
joint but not several personal guarantees of certain
stockholders........................................... 3,116 2,828
Citizens National Bank IRB with variable interest at
6.5% until March, 2000, at which time rate is subject
to periodic adjustments based on U.S. Treasury Note
rates, due $14 monthly plus interest with unpaid
principal balance due April, 2010, secured by certain
real estate and improvements in Paris, Illinois........ 2,375 2,209
American National Bank IRB with variable interest based
on prime (6.97% at December 31, 1995 and 6.77% at
December 31, 1996), due $7 monthly with unpaid
principal balance due November, 2007, secured by real
estate and improvements on a specific building in
Assumption, Illinois and joint and several personal
guarantees of certain stockholders..................... 986 903
LaSalle Bank revolving line that has a maximum borrowing
level ($25,208 at December 31, 1996) based upon
accounts receivable and inventory and secured by
accounts receivable, inventories and certain equipment;
interest is at variable rates based on the lower of
floating prime rate plus one-half or LIBOR-based rates
(7.6% to 8.5% at December 31, 1995 and 8.00%, at
December 31, 1996); outstanding letters of credit
reduce the overall level of borrowing; at December 31,
1996, the Company has $3,937 of standby letters of
credit reducing the overall availability of the line to
$5,247; this revolving line terminates on May 31, 1998. 20,798 16,024
LaSalle Bank term note payable with variable interest
based on floating prime rate plus one or LIBOR-based
rate (9.25% and 8.53%, respectively, at December 31,
1996), due $200 quarterly through June, 2001, secured
by accounts receivable, inventories and certain
equipment ............................................. -- 3,600
Capital lease on equipment with interest at 8%, due $13
monthly through March, 1998, secured by the related
equipment.............................................. 359 232
Various noncompete, license and patent agreement payable
noninterest-bearing and payable in varying amounts
through 2003........................................... 439 209
Notes to former stockholders payable in varying amounts
each May and November through November, 2006, with
interest at 8%......................................... -- 17,307
------- -------
Total............................................... 33,930 47,906
Less--
Current maturities.................................... (1,961) (3,339)
Note payable to bank.................................. (10,797) --
------- -------
Total long-term debt................................ $21,172 $44,567
======= =======
</TABLE>
F-11
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
Maturities of long-term debt during the next five years are as follows (in
thousands):
<TABLE>
<S> <C>
1997............................. $ 3,339
1998............................. 19,224
1999............................. 3,138
2000............................. 2,147
2001............................. 2,720
Thereafter....................... 17,338
-------
Total.......................... $47,906
=======
</TABLE>
The long-term debt agreements provide for certain restrictive financial and
non-financial covenants. The more significant of these covenants require the
maintenance of certain levels of working capital, net worth, dividend
payments, cash flow coverage and current ownership structure.
Costs associated with obtaining the debt described above aggregate to $0.3
million and $0.4 million as of December 31, 1995 and 1996, respectively.
Amortization of deferred financing costs amounted to $0.1 each year for each
of the years ended December 31, 1994, 1995 and 1996. As of December 31, 1995
and 1996, accumulated amortization of such costs was $0.1 million and $0.2
million, respectively.
The fair value of long-term debt approximates carrying value based on
borrowing rates currently available to the Company for borrowing with similar
terms and maturities.
8. EMPLOYEE BENEFIT PLANS
On December 31, 1995, the Company terminated its profit sharing plan. The
plan's assets were distributed at the direction of the account holders. Under
this plan, the Company's contribution was discretionary. The Company made
contributions of $212,000 during 1994 and made no contributions to this plan
during 1995.
On January 1, 1996, the Company created a defined contribution plan covering
virtually all full-time employees. Under the plan, Company contributions are
discretionary. During 1996, the Company provided a 25% matching contribution
up to 1% of the employees' compensation. Employer contributions to this plan
were $79,000 during 1996.
On July 1, 1996, certain employees were granted individual amounts of
"gainshares" based on several factors, including experience and
responsibilities. This program, which terminates December 31, 1997, provides
for participating employees to receive 40% of the pre-tax profits (as defined
by the stockholders) that are in excess of 5% of net sales. Each participating
employee's portion is calculated based on the number of shares held divided by
the total number of shares provided. Total expense for 1996 was $2.3 million.
9. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal matters arising in the normal
course of business which, in the opinion of management, will not have a
material effect on the Company's financial position or results of operations.
The Company has month by month leases for several buildings and paid rentals
in 1995 and 1996 of $131,880 and $592,000, respectively. The Company leases
various other items of equipment and vehicles under operating lease
arrangements. Total lease expense for the years ended December 31, 1994, 1995
and 1996, was $2.3 million, $3.1 million and $2.1 million, respectively.
F-12
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
<TABLE>
<S> <C>
Operating lease commitments for the next five years are as follows (in
thousands):
</TABLE>
<TABLE>
<S> <C>
1997............................................................. $1,968
1998............................................................. 1,739
1999............................................................. 1,263
2000............................................................. 824
2001............................................................. 488
Thereafter....................................................... 184
======
</TABLE>
The Company has a contract with the Syrian Government to erect a grain
handling system. Other current assets include $1.9 million of monies withheld
until completion of the project and the meeting of certain performance
criteria. Accrued expenses include $0.9 million for supervisory costs and
commissions expected to be paid in 1997. The project is anticipated to be
completed in late 1997.
10. SEGMENT INFORMATION
The Company is engaged in the manufacture and sale of equipment for the
agricultural industry. The Company's product lines include: grain storage,
ventilation and handling equipment; swine feeding, ventilation and confinement
systems; and poultry feeding, ventilation, watering and hatching systems. The
Company's products are sold primarily to independent dealers and distributors
and are marketed through the Company's sales personnel and network of
independent dealers. Users of the Company's products include farmers, feed
mills, grain elevators and processing plants and poultry and swine
integrators. The Company's three largest customers, in total, accounted for
approximately 12.4%, 14.9% and 14.2% of sales for the years ended December 31,
1994, 1995 and 1996, respectively. No single customer accounted for more than
10% of net sales in 1996. In 1994 and 1995, one customer together with its
affiliate accounted for more than 10% of net sales. Export sales outside the
United States represented 20%, 26%, and 31% of the Company's net sales in
1994, 1995 and 1996. Net sales by each major geographic region are as follows
(in millions):
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
United States.............................................. $104.4 $104.3 $123.0
Asia....................................................... 5.9 16.2 18.7
Canada..................................................... 9.4 5.6 13.2
Latin America.............................................. 7.2 7.5 10.2
Midwest.................................................... 1.8 2.7 10.2
Europe..................................................... 1.7 2.0 2.5
All other.................................................. 0.5 2.9 0.7
------ ------ ------
$130.9 $141.2 $178.5
====== ====== ======
</TABLE>
11. RELATED-PARTY TRANSACTIONS
The Company has various advances to and from stockholders of the Company
netting to a $0.3 million receivable and a $0.4 million payable as of December
31, 1995 and 1996, respectively.
In addition, the Company had a note receivable from Sloan Implement Company,
Inc. of $1.9 million as of December 31, 1995. The note was repaid during 1996.
A significant customer and an affiliate of the Company, Carolina Agri-
Systems, Inc. ("CASI"), ceased distribution operations in North Carolina and
sold its only other operation, Farmer Boy Ag, Inc. ("FBA") in December 1995.
Sales to CASI had averaged $6.0 million per year for 1994 and 1995. As a
result of this event,
F-13
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
DECEMBER 31, 1996
the Company received from CASI the proceeds from the sale and inventory the
Company previously sold to CASI. The remaining receivable due from CASI of
$3.4 million was written off in the year ended December 31, 1995. In
connection with this transaction, the Company entered into an agreement to
lease two facilities that are owned by CASI. Lease payments to CASI during
1996 were $204,000.
After the sale of FBA noted above, FBA's name was changed to FarmPRO, Inc.
("FarmPRO"). As part of the proceeds of the sale, CASI received a note of $1.4
million from the purchasers of FarmPRO, which was subsequently assigned to the
Company. The note receivable is a 10-year note with payments of $30,000 per
quarter and bears interest at a rate of 9%. Also in 1995, the Company and
FarmPro entered into a long-term supply agreement pursuant to which FarmPRO
agreed to purchase 90% of its equipment requirements from the Company. Sales
to FarmPRO in 1996 were $12.8 million.
12. UNAUDITED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
1995-
Net sales................................... $23,281 $41,146 $47,491 $29,273
Gross profit................................ 3,604 7,183 9,064 6,336
Net income (loss)........................... (1,110) 484 2,155 (3,007)
Net income (loss) per share................. (.62) .27 1.20 (1.67)
======= ======= ======= =======
1996-
Net sales................................... $26,051 $46,500 $64,929 $41,057
Gross profit................................ 6,473 11,257 15,260 9,851
Net income (loss)........................... (978) 3,745 6,039 1,693
Net income (loss) per share................. (.54) 2.08 3.02 .85
======= ======= ======= =======
</TABLE>
14. SUBSEQUENT EVENTS
In February 1997, the Company completed the acquisition of the assets of
Clark Products, Inc. for approximately $1.6 million. This acquisition
complements the Company's poultry equipment product line.
In November 1997, the Company anticipates issuing $100 million of Senior
Subordinated Notes ("Notes") which will be due 2007. The Notes will represent
unsecured senior subordinated obligations of the Company. The Notes have
customary restrictive covenants including restrictions of incurrence of
additional indebtedness and limitations on dividends and other payments
affecting subsidiaries. Upon occurrence of a change in control (as defined),
the Company is required to repurchase the Notes at a price equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase.
The Company entered into a stock purchase agreement dated October 10, 1997
to acquire all of the capital stock of David Manufacturing Co. ("DMC") for
approximately $19.3 million in cash. DMC is a manufacturer and supplier of
grain drying and handling equipment. The acquisition, which will be accounted
for as a purchase, is expected to close on November 5, 1997.
F-14
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
ASSETS 1996 1997
------ ------------ -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents......................... $ 1,490 $ 2,870
Accounts receivable, net.......................... 18,453 30,012
Inventories, net.................................. 19,805 28,600
Other............................................. 3,890 7,820
-------- --------
Total current assets............................ 43,638 69,302
Property, Plant and Equipment, net.................. 22,106 23,364
Other Assets........................................ 1,828 3,438
-------- --------
Total assets.................................... $ 67,572 $ 96,104
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses............. $ 15,629 $ 23,541
Dividend payable.................................. 5,526 6,074
Other............................................. 3,892 2,451
Current maturities of long-term debt.............. 3,339 3,381
-------- --------
Total current liabilities....................... 28,386 35,447
-------- --------
Long-Term Debt, less current maturities............. 44,567 59,436
-------- --------
Stockholders' Equity:
Common stock, $.01 par value, voting (authorized
2,000,000 shares--1995, 6,900,000 shares--1996;
Issued--1,800,000 shares--1995, 1,800,000
shares--1996).................................... 18 18
Common stock, $.01 par value, non-voting
(authorized 200,000 shares--1995, 1,100,000
shares--1996; issued no shares--1995, 200,000
shares--1996).................................... 2 2
Paid-in capital................................... 2,473 2,473
Cumulative Translation Adjustment................. -- (411)
Retained earnings................................. 17,659 24,672
Treasury stock, at cost........................... (25,533) (25,533)
-------- --------
Total stockholders' equity...................... (5,381) 1,221
-------- --------
Total liabilities and stockholders' equity...... $ 67,572 $ 96,104
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-15
<PAGE>
THE GSI GROUP, AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
Net Sales............................................... $ 137,479 $171,965
Cost of Sales........................................... 104,489 129,967
---------- ----------
Gross profit........................................ 32,990 41,998
Selling, general and administrative expenses............ 21,417 25,461
---------- ----------
Operating income.................................... 11,573 16,537
Other Income (Expense):
Interest expense...................................... (2,524) (3,712)
Other, net............................................ 239 299
---------- ----------
Income from continuing operations................... 9,288 13,124
Discontinued Operations:
Loss on sale of discontinued business................... (482) --
---------- ----------
Net income.......................................... $ 8,806 $ 13,124
========== ==========
Earnings per common share:
Continuing operations................................. $ 4.89 $ 6.56
Discontinued operations............................... (0.25) --
---------- ----------
Net income............................................ $ 4.64 $ 6.56
========== ==========
Weighted average shares outstanding..................... $1,900,000 $2,000,000
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-16
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
30,
-----------------
1996 1997
-------- -------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income................................................ $ 8,806 $13,124
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Depreciation and amortization........................... 2,395 2,366
Changes in assets and liabilities....................... (13,655) (13,847)
-------- -------
Net cash flows provided by (used in) operating
activities......................................... (2,454) 1,643
-------- -------
Cash Flows from Investing Activities:
Proceeds from sale of discontinued business............... 8,464 --
Payments received on notes receivable..................... 2,100 201
Acquisition of Clark, net of cash acquired................ -- (1,628)
Capital expenditures...................................... (2,610) (4,105)
Other..................................................... 727 67
-------- -------
Net cash flows provided by (used in) investing
activities......................................... 8,681 (5,465)
-------- -------
Cash Flows from Financing Activities:
Proceeds from former stockholder loans.................... 17,490 --
Proceeds from issuance of long-term debt.................. 4,000 --
Payments on long-term debt................................ (1,610) (2,420)
Net (payments) borrowing under line-of-credit agreement... (1,080) 16,797
Proceeds from issuance of common stock.................... 2,250 --
Dividends paid............................................ -- (9,044)
Purchase of treasury stock................................ (25,490) --
Other..................................................... (109) (131)
-------- -------
Net cash flows (used in) provided by financing
activities......................................... (4,549) 5,202
-------- -------
Increase in Cash and Cash Equivalents....................... 1,678 1,380
Cash & Cash Equivalents, beginning of period................ 938 1,490
-------- -------
Cash & Cash Equivalents, end of period...................... $ 2,616 $ 2,870
======== =======
Supplemental cash flows disclosure--cash paid for interest.. $ 1,938 $ 3,621
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-17
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for a complete set of financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation (consisting of normal
recurring accruals) have been included. As interim periods are not necessarily
indicative of the results of operations for a full year, these financial
statements should be read in conjunction with the financial statements and
notes thereto included in this Offering Memorandum.
The consolidated financial statements include the accounts of The GSI Group,
Inc. and its subsidiaries (the "Company"). All significant intercompany
transactions and accounts have been eliminated in the accompanying
consolidated financial statements.
NOTE 2--INVENTORIES
Inventories of the Company consist of the following (in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996 AS OF SEPTEMBER 30, 1997
----------------------- ------------------------
<S> <C> <C>
Raw materials.................. $ 3,605 $ 5,374
Work-in-process................ 1,802 2,836
Finished goods................. 14,398 20,390
------- -------
$19,805 $28,600
======= =======
</TABLE>
NOTE 3--ACCOUNTS PAYABLE AND ACCRUED EXPENSES (IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996 AS OF SEPTEMBER 30, 1997
----------------------- ------------------------
<S> <C> <C>
Accounts payable............... $ 7,071 $11,294
Accrued compensation........... 594 2,379
Other accrued expenses......... 7,364 9,868
------- -------
$15,029 $23,541
======= =======
</TABLE>
NOTE 4--ALLOWANCE FOR DOUBTFUL ACCOUNTS (IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996 AS OF SEPTEMBER 30, 1997
----------------------- ------------------------
<S> <C> <C>
Allowance for Doubtful
Accounts..................... $643 $1,918
==== ======
</TABLE>
NOTE 5--LONG-TERM DEBT
Long-term debt of the Company consists of the following (in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996 AS OF SEPTEMBER 30, 1997
----------------------- ------------------------
<S> <C> <C>
CIT note payable.............. $ 4,594 $ 3,541
Metropolitan Life Insurance
Company note payable......... 2,828 2,612
Citizens National Bank
industrial revenue bonds..... 2,209 2,084
American National Bank
industrial revenue bonds..... 903 841
LaSalle Bank revolving line... 16,024 32,822
LaSalle Bank term note
payable...................... 3,600 3,000
Capital lease................. 232 128
Clark note payable............ -- 643
Notes to former stockholders.. 17,307 17,146
Other......................... 209 --
------- -------
Total debt.................. 47,906 62,817
Less: current maturities...... (3,339) (3,381)
------- -------
$44,567 $59,436
======= =======
</TABLE>
F-18
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company maintains a line-of-credit that has a maximum borrowing level of
$37.6 million as of September 30, 1997 based upon accounts receivable and
inventory and secured by accounts receivable, inventories and certain
equipment. Interest is at variable rates based on floating prime rate plus
one-half or LIBOR-based rates as of December 31, 1996 and a floating prime
rate or LIBOR based rate as of September 30, 1997 (8.75% and 8.00%,
respectively, at December 31, 1996 and 8.5% and 7.6%, respectively at
September 30, 1997.) Outstanding letters of credit, which reduce the overall
level of borrowing, as of December 31, 1996 and September 30, 1997 were $3.9
million each period, respectively which reduces the overall availability of
the line to $5.2 million at December 31, 1996 and $0.9 million at September
30, 1997. The line of credit matures on May 31, 1999.
The Company has a term note payable at variable interest based on a floating
prime rate plus one or LIBOR-based rate (9.25% and 8.53%, respectively, at
December 31, 1996 and 9.5% and 8.8%, respectively, at September 30, 1997.) The
payable is secured by accounts receivable, inventories and certain equipment
and is due June, 2001.
The line-of-credit agreement provides certain restrictive financial and non-
financial covenants including maintenance of certain levels of capital
spending and cash flow coverage.
NOTE 6--EARNINGS PER SHARE
Earnings (loss) per common share have been computed based on the weighted
average common shares outstanding. Primary and fully diluted earnings (loss)
per share are the same.
NOTE 7--SUBSEQUENT EVENTS
In November 1997, the Company anticipates issuing $100 million of Senior
Subordinated Notes ("Notes"), which will be due 2007. The Notes will represent
unsecured senior subordinated obligations of the Company. The Notes have
customary restrictive covenants including restrictions of incurrence of
additional indebtedness and limitations on dividends and other payments
affecting subsidiaries. Upon occurrence of a change in control (as defined),
the Company is required to repurchase the Notes at a price equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase.
The Company entered into a stock purchase agreement dated October 10, 1997
to acquire David Manufacturing Co. ("DMC") for approximately $19.3 million in
cash. DMC is a manufacturer and supplier of grain drying and handling
equipment. The acquisition, which will be accounted for as a purchase, is
expected to close on November 5, 1997.
F-19
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
David Manufacturing Co.
Mason City, Iowa
We have audited the accompanying balance sheet of David Manufacturing Co. as
of October 31, 1996, and the related statements of income, stockholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of David Manufacturing Co. as
of October 31, 1996, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
McGladrey & Pullen, LLP
Mason City, Iowa
December 6, 1996
F-20
<PAGE>
DAVID MANUFACTURING CO.
BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31, SEPTEMBER 30,
1996 1997
----------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS (NOTE 2)
Current Assets
Cash............................................... $ 218,151 $ 97,850
Trade receivables, less allowance for doubtful
accounts 1996 and 1997 $30,000.................... 3,472,120 4,890,787
Inventories (Note 3)............................... 3,444,971 4,712,794
Deferred taxes (Note 6)............................ 153,645 153,645
Other.............................................. 57,327 47,757
---------- -----------
Total current assets............................. 7,346,214 9,902,833
---------- -----------
Property and Equipment
Land and land improvements......................... 197,506 232,053
Buildings.......................................... 2,660,012 2,899,609
Machinery and equipment............................ 3,103,488 3,899,154
---------- -----------
5,961,006 7,030,816
Less accumulated depreciation...................... 3,528,158 3,938,658
---------- -----------
2,432,848 3,092,158
---------- -----------
Patent Rights, at amortized cost..................... 130,264 118,802
---------- -----------
$9,909,326 $13,113,793
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable (Note 2).............................. $ 600,000 $ 400,000
Current maturities of long-term debt (Note 2)...... 137,952 138,000
Accounts payable................................... 574,358 1,501,682
Accrued profit-sharing bonus....................... 147,376 224,000
Accrued salaries and wages......................... 147,512 233,600
Accrued vacations.................................. 130,920 148,920
Accrued commissions to affiliated DISC corporation
(Note 7).......................................... 196,442 --
Other accrued expenses............................. 237,460 248,786
Income taxes payable............................... 420,465 1,293,885
---------- -----------
Total current liabilities........................ 2,592,485 4,188,873
---------- -----------
Long-Term Debt (Note 2).............................. 1,029,692 903,511
---------- -----------
Deferred Taxes (Note 6).............................. 126,157 126,157
---------- -----------
Commitments and Contingencies (Note 4)
Stockholders' Equity
Common stock, $100 par value; authorized 100,000
shares;
issued 2,465 shares............................... 246,500 246,500
Retained earnings (Note 2)......................... 5,914,492 7,648,752
---------- -----------
6,160,992 7,895,252
---------- -----------
$9,909,326 $13,113,793
========== ===========
</TABLE>
See Notes to Financial Statements.
F-21
<PAGE>
DAVID MANUFACTURING CO.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
ELEVEN MONTHS ELEVEN MONTHS
YEAR ENDED ENDED ENDED
OCTOBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996
----------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Net sales............................. $24,346,130 $26,012,421 $20,544,144
Cost of goods sold.................... 19,030,500 19,630,093 15,757,143
----------- ----------- -----------
Gross profit...................... 5,315,630 6,382,328 4,787,001
Other operating revenue............... 437,727 438,892 381,264
----------- ----------- -----------
5,753,357 6,821,220 5,168,265
Selling and administrative expenses,
including commissions to affiliate,
October 31, 1996 $196,442; September
30, 1997 None; September 30, 1996
$180,000............................. 3,156,012 3,146,843 2,762,046
----------- ----------- -----------
Operating income.................. 2,597,345 3,674,377 2,406,219
Financial expense, interest........... 398,257 167,368 388,706
----------- ----------- -----------
Income before income taxes........ 2,199,088 3,507,009 2,017,513
----------- ----------- -----------
Federal and state income taxes:
Current............................. 792,298 1,403,000 873,000
Deferred............................ 55,281 -- --
----------- ----------- -----------
847,579 1,403,000 873,000
----------- ----------- -----------
Net income........................ $ 1,351,509 $ 2,104,009 $ 1,144,513
=========== =========== ===========
Earnings per common share............. $ 548.28 $ 853.55 $ 464.30
=========== =========== ===========
Weighted average common shares
outstanding.......................... 2,465 2,465 2,465
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-22
<PAGE>
DAVID MANUFACTURING CO.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SHARES OF RETAINED
COMMON STOCK COMMON STOCK EARNINGS TOTAL
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Balance, October 31, 1995.. 2,465 $ 246,500 $ 4,562,983 $ 4,809,483
Net income................ -- -- 1,351,509 1,351,509
----- --------- ----------- -----------
Balance, October 31, 1996.. 2,465 246,500 5,914,492 6,160,992
Net income (unaudited).... -- -- 2,104,009 2,104,009
Dividends on common stock
($150 per share)
(unaudited).............. -- -- (369,749) (369,749)
----- --------- ----------- -----------
Balance, September 30, 1997
(unaudited)............... 2,465 $ 246,500 $ 7,648,752 $ 7,895,252
===== ========= =========== ===========
</TABLE>
See Notes to Financial Statements.
F-23
<PAGE>
DAVID MANUFACTURING CO.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN MONTHS ELEVEN MONTHS
YEAR ENDED ENDED ENDED
OCTOBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996
------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income......................... $ 1,351,509 $ 2,104,009 $ 1,144,513
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation..................... 326,228 410,500 304,700
Amortization..................... 12,504 11,462 11,462
Provision for doubtful accounts.. 64,816 -- --
(Gain) on sale of equipment...... (540) -- --
Deferred taxes................... 55,281 -- --
Change in assets and liabilities:
(Increase) in trade receivables.. (1,867,167) (1,418,667) (2,925,309)
(Increase) decrease in
inventories..................... 2,445,867 (1,267,823) 1,374,877
(Increase) decrease in other
current assets.................. (7,549) 9,570 (6,601)
Increase in accounts payable and
accrued expenses................ 402,744 922,920 983,195
Increase in income taxes payable. 85,003 873,420 516,595
------------ ------------ ------------
Net cash provided by operating
activities.................... 2,868,696 1,645,391 1,403,432
------------ ------------ ------------
Cash Flows from Investing Activities
Proceeds from sale of equipment.... 550 -- --
Purchase of property and equipment. (352,045) (1,069,810) (352,559)
------------ ------------ ------------
Net cash (used in) investing
activities.................... (351,495) (1,069,810) (352,559)
------------ ------------ ------------
Cash Flows from Financing Activities
Borrowings on revolving credit
agreement......................... 13,950,000 13,740,000 12,450,000
Payments on revolving credit
agreement......................... (15,438,000) (13,940,000) (13,225,000)
Principal payments on other
borrowings........................ (948,796) (126,133) (335,833)
Cash dividends paid................ -- (369,749) --
------------ ------------ ------------
Net cash (used in) financing
activities.................... (2,436,796) (695,882) (1,110,833)
------------ ------------ ------------
Net increase (decrease) in
cash.......................... 80,405 (120,301) (59,960)
Cash
Beginning.......................... 137,746 218,151 137,746
------------ ------------ ------------
Ending............................. $ 218,151 $ 97,850 $ 77,786
============ ============ ============
Supplemental Disclosures of Cash Flow
Information
Cash payments for:
Interest......................... $ 420,728 $ 144,794 $ 396,777
Income taxes..................... 707,295 529,580 356,405
</TABLE>
See Notes to Financial Statements.
F-24
<PAGE>
DAVID MANUFACTURING CO.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business: The Company manufactures and sells grain handling and
drying equipment to dealers.
Sales are made on credit terms established by the Company. The Company's
customers are concentrated in the agricultural industry and are located
throughout the Midwest.
Significant accounting policies:
Accounting estimates and assumptions: The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that effect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and cash equivalents: For purposes of reporting cash flows, the
Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The Company
maintains cash in bank deposit accounts, which at times may exceed
federally insured limits. The Company has not experienced any losses in
such accounts.
Inventories: Inventories are valued at the lower of cost, as determined
by the last-in, first-out (LIFO) method, or market.
Property and equipment: Property and equipment is stated at cost.
Depreciation is computed primarily by the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Land improvements.................................................... 10-20
Buildings............................................................ 7-39
Machinery and equipment.............................................. 3-20
</TABLE>
Patent rights: Patent rights are being amortized by the straight-line
method over a period of twelve years and are periodically reviewed for
impairment based upon an assessment of future operations to ensure that
they are appropriately valued. Accumulated amortization on patent rights
totaled $19,798 and $31,260 at October 31, 1996 and September 30, 1997,
respectively.
Warranty claims: Estimated warranty costs are provided at the time of
sale of the warranted products.
Revenue recognition: Revenue is recognized when the products are shipped.
Income taxes: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of
assets and liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will
not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Earnings per common share: Earnings per common share are determined by
dividing net income by the weighted average number of shares outstanding.
New accounting pronouncements: SFAS No. 128, "Earnings Per Share," was
issued in February 1997 and will be adopted by the Company effective
January 1, 1998. This new pronouncement establishes revised methods for
computing and reporting earnings per share. Adoption of this standard will
not materially impact previously reported earnings per share.
SFAS No. 130, "Reporting Comprehensive Income," was issued in July 1997
and will be adopted by the Company effective January 1, 1998. This new
pronouncement establishes standards for reporting and
F-25
<PAGE>
DAVID MANUFACTURING CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
display of comprehensive income and its components. Adoption of this
standard will not impact the Company's financial position or results of
operations.
Interim Financial Information (unaudited): The financial statements as of
September 30, 1997, and for the eleven month periods ended September 30,
1997 and 1996, are unaudited, but in the opinion of management included all
adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial position and results of operations.
The operating results for the interim periods are not indicative of the
operating results to be expected for a full year or for other interim
periods. Not all disclosures required by generally accepted accounting
principles necessary for a complete presentation have been included.
NOTE 2. PLEDGED ASSETS, NOTE PAYABLE AND LONG-TERM DEBT
The Company has a revolving line of credit with a bank whereby outstanding
borrowings may not exceed the lesser of the borrowing base defined as a
percentage of eligible accounts receivable and inventory or $6,250,000.
Interest is payable monthly at the bank's base rate plus variable percentage
points based on achieving certain financial ratios (currently 9.0%).
Outstanding borrowings ($600,000 as of October 31, 1996) are due March 31,
1997. As of October 31, 1996 the remaining available borrowing base on this
line of credit was $5,400,000. The line of credit is collateralized by all
assets of the Company and the personal guarantees of Mr. Wesley Cagle, Mr.
Stephen Wolfe, and Mr. Keith Braun up to $150,000 each, plus interest and all
costs of collection. A letter of credit of $250,000 is available as part of
the revolving line of credit. The loan agreement contains various
restrictions, including restrictions on the payment of dividends, expenditures
for property and equipment and the maintenance of various financial ratios
including debt to tangible net worth. At October 31, 1996, the Company was in
compliance with all loan covenants.
The Company has a balance due of $1,167,644 on an unsecured contract payable
to David M. Murphy. The contract is due in monthly installments of $17,114
including interest at 6.1%, with final payment due October 1, 2003. The
contract payable is subordinated to bank debt; however, such subordination
will permit payment of principal and interest, so long as no event of default
has occurred under the credit agreement.
Approximate maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Year ending October 31:
1997........................................... $ 137,952
1998........................................... 146,606
1999........................................... 155,803
2000........................................... 165,578
2001........................................... 175,965
Thereafter....................................... 385,740
----------
$1,167,644
==========
</TABLE>
Based on the borrowings rates currently available to the Company for bank
loans with similar terms and average maturities, the fair value of the note
payable approximates its carrying value and the fair value of the long-term
debt is approximately $1,065,000.
F-26
<PAGE>
DAVID MANUFACTURING CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. INVENTORIES
The composition of inventories at replacement cost is as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
1996
-----------
<S> <C>
Production materials............................ $1,515,818
Work in process................................. 965,114
Finished goods.................................. 3,768,042
----------
6,248,974
Less LIFO reserve............................... 2,804,003
----------
$3,444,971
==========
</TABLE>
The liquidation of LIFO inventory quantities during the year ended October
31, 1996, which were carried at the lower of cost prevailing in certain
earlier years, resulted in an increase in the net income for the year ended
October 31, 1996 of approximately $123,000 or $49.90 per share of common
stock.
NOTE 4. PRODUCT LIABILITY INSURANCE
The Company has $2,000,000 of product liability insurance which requires a
$100,000 deductible per claim by the Company. Currently, there are no
significant product liability claims outstanding as of October 31, 1996.
NOTE 5. PROFIT-SHARING BONUS PLAN
The Company has a profit-sharing bonus plan for those employees who meet the
eligibility requirements. Substantially all of the Company's full-time
employees are covered by the plan. The Company expensed $147,376 during the
year ended October 31, 1996.
NOTE 6. INCOME TAX MATTERS
The components of deferred tax assets and liabilities at October 31, 1996
are as follows:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts................................ $ 12,275
Inventory uniform capitalization............................... 55,070
Estimated product liability.................................... 12,275
Accrued vacations.............................................. 53,567
Estimated liability on product warranties...................... 20,458
--------
153,645
Deferred tax liabilities, property and equipment................. 126,157
--------
$ 27,488
========
</TABLE>
The income tax provision differs from the amount of income tax determined by
applying the U.S. Federal income tax rate to pretax income for year ended
October 31, 1996:
<TABLE>
<S> <C>
Computed expected tax expense.................................... $747,690
Increase in income taxes resulting from:
State income taxes, net of federal benefits.................... 88,178
Nondeductible expenses......................................... 2,524
Other.......................................................... 9,187
--------
$847,579
========
</TABLE>
F-27
<PAGE>
DAVID MANUFACTURING CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7. AFFILIATED COMPANY
Effective January 1, 1995, the Company became affiliated with the David
Service Company, a foreign DISC corporation, as a result of having common
stockholders and management. The Company has an agreement with the David
Service Company whereby a commission of up to 50% of net export profits can be
paid by the Company to the DISC corporation. For the year ended October 31,
1996, the commission expense totaled $196,442.
NOTE 8. UNION REPRESENTATION AT DMC
After an impasse in negotiations during a five week strike beginning March
13, 1996, replacement workers were hired for those refusing to come back to
work under the Company's final offer.
A petition for a vote of decertification was signed by 51 percent of the
workers and submitted by them to the NLRB (National Labor Relations Board).
Just prior to the scheduled vote, the Company was sent a letter by the Union
stating they were no longer interested in representing the workers at DMC.
This negated the vote and left DMC employees without union representation. The
workplace is now union free.
F-28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY GUARANTOR OR THE EXCHANGE
AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information...................................................... iv
Prospectus Summary......................................................... 1
Risk Factors............................................................... 13
The Exchange Offer......................................................... 20
Use of Proceeds............................................................ 31
Capitalization............................................................. 32
Selected Consolidated Financial Data....................................... 33
Pro Forma Financial Data................................................... 35
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 41
Business................................................................... 46
Management................................................................. 57
Ownership of Capital Stock................................................. 60
Certain Relationships and Related Transactions............................. 60
Description of the New Credit Agreement.................................... 64
Description of the New Notes............................................... 65
Book-Entry; Delivery and Form.............................................. 91
Registration Rights........................................................ 92
Certain Federal Income Tax Considerations.................................. 95
Plan of Distribution....................................................... 97
Legal Matters.............................................................. 97
Experts.................................................................... 97
Index to Consolidated Financial Statements................................. F-1
</TABLE>
---------------
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$100,000,000
LOGO
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
---------------
PROSPECTUS
---------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations.
Section 145 empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation),
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation or another enterprise if serving at the request of the
corporation. Depending on the character of the proceeding, a corporation may
indemnify against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding if the person indemnified acted in good faith
and in a manner be reasonably believed to be in or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. In
the case of an action by or in the right of the corporation, no
indemnification may be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine that, despite the adjudication
of liability, such person is fairly and reasonably entitled to indemnity for
such expenses which the court shall deem proper. Section 145 further provides
that to the extent a director or officer of a corporation has been successful
in the defense of any action, suit or proceeding referred to above or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection therewith. In addition, pursuant to Article SEVENTH of the
Company's Amended and Restated Certificate of Incorporation, a director will
not be liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director. Article EIGHTH of the Company's
Amended and Restated Certificate of Incorporation provides that with respect
to threatened, pending or completed actions, suits or proceedings to which any
individual is made a party by reason of such individual being or having been a
director, officer, employee or agent of the Company, or is or was serving at
the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
the Company has the power to indemnify such persons, provided that such person
in general, acted in good faith and in the best interests of the Company.
The Company maintains a directors' and officers' liability insurance policy
which insures directors and officers of the Company and officers of the
Company and its subsidiaries for losses as a result of claims based upon their
acts or omissions in the discharge of their duties as directors and officers
of the Company and its subsidiaries.
Sections 851 and 856 of the Iowa Business Corporation Act ("IBCA") provide
that a corporation has the power to indemnify its directors and officers
against liabilities and expenses incurred by reason of such person serving in
the capacity of director or officer, if such person has acted in good faith
and in a manner reasonably believed by the individual to be in or not opposed
to the best interests of the corporation, and in any criminal proceeding if
such person had no reasonable cause to believe the individual's conduct was
unlawful. The foregoing indemnity provisions notwithstanding, in the case of
actions brought by or in the right of the corporation, no indemnification
shall be made to such director or officer with respect to any matter as to
which such individual has been adjudged to be liable to the corporation
unless, and only to the extent that, a court determines that indemnification
is proper under the circumstances. DMC's Bylaws provide indemnification for
its officers and directors to the extent permitted by the IBCA. DMC's Bylaws
also provide that DMC shall indemnify any of its directors and officers who
are wholly successful, on the merits or otherwise, in the defense of any
proceeding to which such directors or officers were parties, because of the
fact that such directors or officers are or were directors or officers of DMC,
against reasonable expenses incurred by such directors and officers in
connection with such proceeding.
DMC maintains a directors' and officers' liability insurance policy to
insure against losses arising from claims made against its directors and
officers, subject to the limitations and conditions as set forth in the
policies.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The exhibits filed as part of this registration statement are as follows:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
1.1 Purchase Agreement, dated October 30, 1997, among The GSI
Group, Inc., Merrill Lynch, Pierce Fenner & Smith Incorporated
and Morgan Stanley & Co. Incorporated.
3.1 Amended and Restated Articles of Incorporation of The GSI
Group, Inc., as amended as of October 23, 1997.
3.2 By-Laws of The GSI Group, Inc.
3.3 Restated Articles of Incorporation of David Manufacturing Co.,
as amended as of February 17, 1987.
3.4 By-Laws of David Manufacturing Co.
4.1 Indenture, dated November 1, 1997, between The GSI Group, Inc
and LaSalle National Bank, as Trustee, including forms of the
Old Notes and the New Notes issued pursuant to such Indenture.
4.2 First Supplemental Indenture, dated December 19, 1997, between
The GSI Group, Inc. and LaSalle National Bank, as Trustee,
amending Indenture dated November 1, 1997, between The GSI
Group, Inc. and LaSalle National Bank, as Trustee, to quailify
such Indenture under the Trust Indenture Act of 1939.
4.3 Second Supplemental Indenture dated December 19, 1997, exe-
cuted by David Manufacturing Co., amending Indenture dated No-
vember 1, 1997, between The GSI Group, Inc. and LaSalle Na-
tional Bank, as Trustee, to add David Manufacturing Co. as a
Guarantor under such Indenture.
4.4 Registration Rights Agreement, dated November 1, 1997, among
The GSI Group, Inc., David Manufacturing Co., Merrill Lynch,
Pierce Fenner & Smith Incorporated and Morgan Stanley & Co.
Incorporated.
4.5 Agreement of The GSI Group, Inc. to furnish the Securities and
Exchange Commission with a copy of certain instruments relat-
ing to long-term debt of The GSI Group, Inc. upon request.
5.1* Form of Opinion of Mayer, Brown & Platt, dated , 1998.
10.1 Credit Agreement, dated as of November 5, 1997, between The
GSI Group, Inc., as borrower, and LaSalle National Bank, as
lender.
10.2 Guaranty, dated November 26, 1997, executed by The GSI Group,
Inc. in favor of Mercantile Bank National Association.
10.3 Stock Purchase Agreement, dated November 5, 1997, between and
among The GSI Group, Inc., David Manufacturing Company, David
Service Company, the Stockholders of David Manufacturing Com-
pany and the Stockholders of David Service Company.
10.4 Lease, dated April 29, 1997, between The GSI Group, Inc. and
Richard and Priscilla Perry relating to property located in
Mt. Carmel, Illinois.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
10.5 Lease with Option to Purchase, dated July 12, 1996, between
The GSI Group, Inc. and Edgar County Bank & Trust Company, as
Trustee for Trust No. 455-232 relating to property located in
Paris, Illinois.
10.6* Lease regarding property located in Nova Odessa, Brazil.
10.7 Agreement, dated April 9, 1997, between GSI/Cumberland Sdn.
Bhd. and Ban Leng Fibre Sdn. Bhd. relating to property located
in Penang, Malaysia.
10.8 Lease Agreement, dated November 1, 1996, between The GSI
Group, Inc., successor by acquisition to Clark Products, Inc.
and Riddle Valley Industrial Park related to property located
in Lenni, Pennsylvania.
10.9 Asset Purchase Agreement, dated December 20, 1995, by and
among The GSI Group, Inc., Jannock, Inc. and Heritage Vinyl
Products Inc.
10.10* Amended and Restated Employment Agreement, dated as of October
2, 1997, between The GSI Group, Inc. and John C. Sloan.
10.11* Amended and Restated Employment Agreement, dated as of October
2, 1997, between The GSI Group, Inc. and Jorge Andrade.
10.12* Amended and Restated Employment Agreement, dated as of October
2, 1997, between The GSI Group, Inc. and John Funk.
10.13* Amended and Restated Employment Agreement, dated as of October
2, 1997, between The GSI Group, Inc. and Howard Buffett.
10.14 Stock Restriction and Buy-Sell Agreement, dated June 6, 1996,
between The GSI Group, Inc. and John C. Sloan, Jorge Andrade,
John Funk and Howard Buffett.
10.15 First Amendment to Stock Restriction and Buy-Sell Agreement,
dated July 15, 1996, between The GSI Group, Inc. and John C.
Sloan, Jorge Andrade, John Funk and Howard Buffett.
10.16* Second Amendment to Stock Restriction and Buy-Sell Agreement,
dated October 2, 1997, between The GSI Group, Inc. and John C.
Sloan, Jorge Andrade, John Funk and Howard Buffett.
10.17 Stock Restriction and Buy-Sell Agreement, dated January 1,
1997, between The GSI Group, Inc., John C. Sloan, Jorge
Andrade, John Funk and Howard Buffett and the Non-Voting
Shareholders.
10.18* First Amendment to Stock Restriction and Buy-Sell Agreement,
dated as of October 2, 1997, between The GSI Group, Inc., John
C. Sloan, Jorge Andrade, John Funk and Howard Buffett and the
Non-Voting Shareholders.
10.19* Stock Restriction and Cross-Purchase Agreement, dated June 6,
1996, among John C. Sloan, Jorge Andrade, John Funk and Howard
Buffett.
10.20* First Amendment to Stock Restriction and Cross-Purchase Agree-
ment, dated July 15, 1996, among John C. Sloan, Jorge Andrade,
John Funk and Howard Buffett.
10.21* Second Amendment to Stock Restriction and Cross-Purchase
Agreement, dated as of October 2, 1997, among John C. Sloan,
Jorge Andrade, John Funk and Howard Buffett.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
12.1 Computation of Ratio of Earnings to Fixed Charges.
16.1 Letter of Geo. S. Olive & Co., LLC to the Securities and Ex-
change Commission
21.1 List of Subsidiaries of The GSI Group, Inc.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of McGladery & Pullen, LLP.
23.3 Consent of Mayer, Brown & Platt (included in their opinion
filed as Exhibit 5.1).
24.1 Powers of Attorney (included as part of the signature page
hereof).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of LaSalle National Bank.
99.1 Form of Letter of Transmittal for the 10 1/4 Senior Subordi-
nated Notes due 2007.
99.2 Guidelines for Certification of Taxpayer Identification Num-
bers on Substitute Form W-9.
99.3 Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
*To be filed with an Amendment to the Registration Statement.
(b) FINANCIAL STATEMENTS SCHEDULES
Schedules not listed above have been omitted because they are inapplicable
or the information required to be set forth therein is provided in the
Consolidated Financial Statements or the notes thereto.
ITEM 22. UNDERTAKINGS
Each of the undersigned registrants hereby undertakes:
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(a) Each of the undersigned registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in
II-4
<PAGE>
volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Each of the undersigned registrants hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
GSI GROUP, INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN ASSUMPTION,
ILLINOIS ON DECEMBER 22, 1997.
The GSI Group, Inc.
By: /s/ Craig Sloan
_____________________________________
Craig Sloan, Director and Chief
Executive
Officer
EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS JOHN W.
FUNK AND RUSS C. MELLO, OR EITHER OF THEM, SUCH PERSON'S TRUE AND LAWFUL
ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, TO SIGN ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE
AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE GSI GROUP, INC. AND IN THE CAPACITIES AND ON DECEMBER 22, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Craig Sloan Director and Chief Executive Officer
___________________________________________ (Principal Executive Officer)
Craig Sloan
/s/ John W. Funk Director, Chief Financial Officer,
___________________________________________ Secretary and General Counsel (Principal
John W. Funk Financial Officer)
/s/ Jorge Andrade Director and Chief Operating Officer
___________________________________________
Jorge Andrade
Chairman of the Board of Directors
___________________________________________
Howard G. Buffett
/s/ Russ C. Mello Vice President, Finance, Assistant
___________________________________________ Secretary and Assistant Treasurer
Russ C. Mello (Principal Accounting Officer)
</TABLE>
II-6
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
DAVID MANUFACTURING CO. HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN MASON
CITY, IOWA ON DECEMBER 22, 1997.
DAVID MANUFACTURING CO.
/s/ Dale Colee
By: _________________________________
Dale Colee,
Director and Chief Executive
Officer
EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS JOHN W.
FUNK AND RUSS C. MELLO, OR EITHER OF THEM, SUCH PERSON'S TRUE AND LAWFUL
ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, TO SIGN ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE
AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE DAVID MANUFACTURING CO. AND IN THE CAPACITIES AND ON DECEMBER
22, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Dale Colee Director and Chief Executive Officer
___________________________________________ (Principal Executive Officer)
Dale Colee
/s/ Stephen Wolfe Director, Chief Financial Officer and
___________________________________________ Controller (Principal Financial Officer
Stephen Wolfe and Principal Accounting Officer)
/s/ Keith Braun Director
___________________________________________
Keith Braun
/s/ Craig Sloan Director
___________________________________________
Craig Sloan
/s/ Jorge Andrade Director
___________________________________________
Jorge Andrade
/s/ John Funk Director
___________________________________________
John Funk
</TABLE>
II-7
<PAGE>
EXHIBIT 1.1
================================================================================
THE GSI GROUP, INC.
$100,000,000
10-1/4% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
------------------
Dated as of October 30, 1997
================================================================================
<PAGE>
$100,000,000
THE GSI GROUP, INC.
(a Delaware corporation)
10-1/4% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
------------------
October 30, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Morgan Stanley & Co. Incorporated
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
The GSI Group, Inc., a Delaware corporation (the "Company"), confirms
-------
its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and Morgan Stanley & Co. Incorporated
-------------
(collectively, the "Initial Purchasers," which term shall also include any
------------------
initial purchaser substituted as hereinafter provided in Section 11 hereof),
with respect to the issue and sale by the Company and the purchase by the
Initial Purchasers, acting severally and not jointly, of the respective
principal amounts set forth in Schedule A hereto of $100,000,000 aggregate
----------
principal amount of the Company's 10-1/4% Senior Subordinated Notes due 2007
(the "Securities"). The Securities are to be issued pursuant to an indenture
----------
dated as of November 1, 1997 (the "Indenture") between the Company and LaSalle
---------
National Bank, as trustee (the "Trustee"). The Securities will be issued in
-------
book-entry form will be issued to Cede & Co. as nominee of The Depository Trust
Company ("DTC") pursuant to a letter agreement, to be dated as of the Closing
---
Time (as defined in Section 2(b) hereof) (the "DTC Agreement"), among the
-------------
Company, the Trustee and DTC.
<PAGE>
-2-
The Company understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
agrees that the Initial Purchasers may resell, subject to the conditions set
forth herein, all or a portion of the Securities to purchasers ("Subsequent
----------
Purchasers") at any time after the date of this Agreement. The Securities are
- ----------
to be offered and sold through the Initial Purchasers without being registered
under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon
--------
exemptions therefrom. Pursuant to the terms of the Securities and the Indenture
investors that acquire Securities may only resell or otherwise transfer such
Securities if such Securities are hereafter registered under the 1933 Act or if
an exemption from the registration requirements of the 1933 Act is available
(including the exemption afforded by Rule 144A ("Rule 144A"), Rule 144
---------
("Rule 144") or Regulation S ("Regulation S") of the rules and regulations
-------- ------------
promulgated under the 1933 Act by the Securities and Exchange Commission (the
"Commission")).
----------
The Company has prepared and delivered to each Initial Purchaser
copies of a preliminary offering memorandum dated October 16, 1997 (the
"Preliminary Offering Memorandum") and has prepared and will deliver to each
- --------------------------------
Initial Purchaser, on the date hereof or the next succeeding day, copies of a
final offering memorandum dated October 30, 1997 (the "Final Offering
--------------
Memorandum"), each for use by such Initial Purchaser in connection with its
- ----------
solicitation of purchases of, or offering of, the Securities. "Offering
--------
Memorandum" means, with respect to any date or time referred to in this
- ----------
Agreement, the most recent offering memorandum (whether the Preliminary
Offering Memorandum or the Final Offering Memorandum, or any amendment or
supplement to either such document), including exhibits thereto, which has been
prepared and delivered by the Company to the Initial Purchasers in connection
with their solicitation of purchases of, or offering of, the Securities.
Capitalized terms not otherwise defined herein have the meanings given
such terms in the Offering Memorandum .
The holders of Securities (including the Initial Purchasers and their
direct and indirect transferees) will be en titled to the benefits of a
registration rights agreement, to be dated as of November 1, 1997 (the
"Registration Rights Agreement"), between the Company and the Initial
-----------------------------
Purchasers. Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Commission under the circumstances set forth therein (i)
a registration statement under the 1933 Act registering the Exchange Securities
(as defined in the Regis-
<PAGE>
-3-
tration Rights Agreement) to be offered in exchange for the Securities and to
use its best efforts to cause such registration statement to be declared
effective and/or (ii) a shelf registration statement pursuant to Rule 415 under
the 1933 Act relating to the resale of the Securities by holders thereof or, if
applicable, relating to the resale of Private Exchange Securities (as defined
in the Registration Rights Agreement) by the Initial Purchasers and to use its
best efforts to cause such shelf registration statement to be declared
effective.
This Agreement, the Indenture, the Securities, the Exchange
Securities, the Private Exchange Securities and the Registration Rights
Agreement are sometimes referred to herein collectively as the "Operative
---------
Documents."
- ---------
All references in this Agreement to financial statements and
schedules and other information which is "contained," "included" or "stated" in
the Offering Memorandum (or other references of like import) shall be deemed to
mean and include all such financial statements and schedules and other
information which are incorporated by reference in the Offering Memorandum.
SECTION 1. Representations and Warranties.
------------------------------
(a) The Company represents and warrants to each Initial Purchaser as
of the date hereof and as of the Closing Time, and agrees with each Initial
Purchaser as follows:
(i) Similar Offerings. The Company has not, directly or
-----------------
indirectly, solicited any offer to buy or offered to sell, and will not,
directly or indirectly, solicit any offer to buy or offer to sell, in the
United States or to any United States citizen or resident, any security
which is or would be integrated with the sale of the Securities in a manner
that would require the Securities to be registered under the 1933 Act.
(ii) The Preliminary Offering Memorandum as of its date did not,
and the Final Offering Memorandum as of the date hereof does not, and at
the Closing Time the Final Offering Memorandum will not, include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that this
representation, warranty and agreement shall not apply to statements in or
omissions from the Preliminary Offering Memorandum or the
<PAGE>
-4-
Final Offering Memorandum made in reliance upon and in conformity with
information furnished to the Company in writing by any Initial Purchaser
through Merrill Lynch expressly for use therein.
(iii) Arthur Andersen LLP and McGladrey & Pullen, LLP who
certified the financial statements and supporting schedules included in the
Offering Memorandum with respect to the Company and its subsidiaries and
David Manufacturing Co., respectively, are independent certified public
accountants within the meaning of Regulation S-X under the 1933 Act.
(iv) The financial statements, together with the related
schedules and notes, included in the Offering Memorandum present fairly in
all material respects the financial position of the Company and its
consolidated subsidiaries at the dates indicated and the statement of
operations, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries and David Manufacturing Co. for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
----
basis throughout the periods involved. The supporting schedules, if any,
included in the Offering Memorandum present fairly in accordance with GAAP
the information required to be stated therein. The selected consolidated
financial data and the summary consolidated financial data included in the
Offering Memorandum present fairly the information shown therein and have
been compiled on a basis consistent with that of the audited financial
statements included in the Offering Memorandum. The statistical
information and other market-related data included in the Offering
Memorandum present fairly, in all material respects, the information and
data shown therein and are derived from sources the Company believes are
accurate in all material respects. The pro forma financial information
relating to the Company and its subsidiaries and the related notes thereto
included in the Offering Memorandum present fairly in all material respects
the in formation shown therein, have been prepared in all material
respects in accordance with the Commission's rules and guidelines with
respect to pro forma financial adjustments and have been properly computed
on the bases described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred
to therein.
<PAGE>
-5-
(v) Since the respective dates as of which information is given
in the Offering Memorandum, except as otherwise stated therein, (A) there
has been no material adverse change in the condition, financial or
otherwise, or in the earnings or business affairs of the Company and its
subsidiaries (as defined in Section 1(a)(vii)) considered as one
enterprise, whether or not arising in the ordinary course of business (a
"Material Adverse Change"), and (B) there has been no dividend or
------------------------
distribution of any kind declared, paid or made by the Company on any class
of its capital stock, except for a dividend of $300,000 paid on its capital
stock on October 2, 1997 and the dividend described under "Use of
Proceeds."
(vi) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware
and has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering
Memorandum and to enter into and perform its obligations under the
Operative Documents; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing could not
reasonably be expected to have a material adverse effect on the condition,
financial or otherwise, or on the earnings or business affairs of the
Company and its subsidiaries considered as one enterprise (a "Material
--------
Adverse Effect").
--------------
(vii) Each "significant subsidiary" of the Company (as such term
is defined in Rule 1-02 of Regulation S-X (each, a "Subsidiary" and
collectively, the "Subsidiaries")) has been duly organized and is validly
------------
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not have a
Material Adverse Effect; except as otherwise disclosed in the Offering
Memorandum, all of the issued and outstanding
<PAGE>
-6-
capital stock of each Subsidiary has been duly authorized and validly
issued, is fully paid and non-assessable and is owned by the Company,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance or other claim; none of the outstanding
shares of capital stock of the Subsidiaries was issued in violation of any
preemptive or similar rights arising by operation of law, or under the
charter or by-laws of any Subsidiary or under any agreement to which the
Company or any Subsidiary is a party.
(viii) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Offering Memorandum in the column
entitled "Actual" under the caption "Capitalization"; all of the issued and
outstanding capital stock of the Company has been duly authorized and
validly issued, is fully paid and non-assessable; none of the issued and
outstanding shares of capital stock of the Company was issued in violation
of any preemptive rights or similar rights arising by operation of law or
under the charter or by-laws of the Company or under any agreement to which
the Company is a party.
(ix) This Agreement has been duly authorized, executed and
delivered by the Company.
(x) The Indenture has been duly authorized by the Company and,
at the Closing Time, will have been duly executed and delivered by the
Company and will constitute a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally or by general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
(xi) The Registration Rights Agreement has been duly authorized
by the Company and, at the Closing Time, will have been duly executed and
delivered by the Company and will constitute a valid and binding agreement
of the Company, enforceable against the Company in accordance with its
terms, except (i) as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating
<PAGE>
-7-
to or affecting enforcement of creditors' rights generally or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and (ii) as the enforcement of rights to
indemnification and contribution thereunder may be limited by federal or
state securities laws or regulations or the public policy underlying such
laws or regulations.
(xii) The Securities have been duly authorized by the Company
and, at the Closing Time, will have been duly executed by the Company and,
when authenticated in the manner provided for in the Indenture and
delivered against payment of the purchase price therefor as provided in
this Agreement, will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to or
affecting enforcement of creditors' rights generally, or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law), and will be in the form contemplated by,
and entitled to the benefits of, the Indenture.
(xiii) The Exchange Securities and the Private Exchange
Securities have been duly authorized by the Company and, when executed by
the Company and authenticated in the manner provided for in the Indenture
and delivered in exchange for the Securities in accordance with the terms
of the Registration Rights Agreement, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law), and will be in the form
contemplated by, and entitled to the benefits of, the Indenture.
(xiv) The Securities, the Exchange Securities, the Registration
Rights Agreement and the Indenture will conform in all material respects
to the respective descriptions thereof contained in the Offering
Memorandum.
<PAGE>
-8-
(xv) Neither the Company nor any of the Subsidiaries is in
violation of its charter or by-laws or in default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which any of them may
be bound, or to which any of the property or assets of the Company or any
of the Subsidiaries is subject (collectively, the "Agreements and
--------------
Instruments"), except for such defaults that could not reasonably be
-----------
expected to have, individually or in the aggregate, a Material Adverse
Effect; and the execution, delivery and performance of each of the
Operative Documents and any other agreement or instrument entered into or
issued or to be entered into or issued by the Company in connection with
the transactions contemplated hereby or thereby or in the Offering
Memorandum and the consummation of the transactions contemplated herein
and in the Offering Memorandum (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Offering Memorandum under the caption "Use of Proceeds"
and the issuance and delivery of the Exchange Securities and the Private
Exchange Securities, if any) and compliance by the Company with its
obligations hereunder and thereunder have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or a Repayment Event (as defined below)
under, or a violation of or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any of the Subsidiaries pursuant to, the Agreements and Instruments, except
for such breaches, defaults, violations, liens, charges or encumbrances
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect, nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or any
of the Subsidiaries or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or any of their respective assets or
properties, except for any such violation that could not reasonably be
expected to result in a Material Adverse Effect. As used herein, a
"Repayment Event" means any event or condition which gives the holder of
---------------
any note, debenture or other
<PAGE>
-9-
evidence of indebtedness (or any person acting on such holder's behalf) the
right to require the repurchase, redemption or repayment of all or a
portion of such indebtedness by the Company or any of the Subsidiaries.
(xvi) No labor dispute with the employees of the Company or any
of the Subsidiaries exists or, to the knowledge of the Company, is
imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or any of the Subsidiaries'
principal suppliers, manufacturers, customers or contractors, which, in
any case, could reasonably be expected to result in a Material Adverse
Effect.
(xvii) Except as disclosed in the Offering Memorandum, there is
no action, suit, proceeding, inquiry or investigation before or by any
court or governmental agency or body, domestic or foreign, now pending, or,
to the knowledge of the Company, threatened, against or affecting the
Company or any of the Subsidiaries or any of their respective properties
or assets which could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect, or which could reasonably be
expected to materially and adversely affect the properties or assets of the
Company or any of the Subsidiaries or the performance by the Company of its
obligations under the Operative Documents. Any pending legal or
governmental proceedings to which the Company or any of the Subsidiaries
is a party or of which any of their respective properties or assets is the
subject which are not described in the Offering Memorandum, including
ordinary routine litigation incidental to the business, could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(xviii) The Company and the Subsidiaries own or possess, or can
acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary to
---------------------
carry on the business now operated by them, and neither the Company nor
any of the Subsidiaries has received any notice or is other wise aware of
any infringement of or conflict with asserted rights of others with
respect to any Intellectual Property or of any facts or circumstances which
would ren-
<PAGE>
-10-
der any Intellectual Property invalid or inadequate to protect the interest
of the Company or any of the Subsidiaries therein, and which infringement
or conflict (if the subject of any unfavorable decision, ruling or finding)
or invalidity or inadequacy could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(xix) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency is necessary or required in connection
with the offering, issuance or sale of the Securities, the Exchange
Securities or the Private Exchange Securities, the performance by the
Company of its obligations under the Operative Documents or the
consummation of the transactions contemplated thereby, except as may be
required under the 1933 Act, under the Trust Indenture Act of 1939, as
amended (the "1939 Act") or pursuant to state securities or "blue sky"
--------
laws.
(xx) The Company and the Subsidiaries possess such permits,
licenses, approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state, local or
----------------------
foreign regulatory agencies or bodies necessary to conduct the business
now operated by them, except where the failure to possess any Governmental
Licenses, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect; the Company and the
Subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply could not
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect; all of the Governmental Licenses are valid and in
full force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force
and effect could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; neither the Company nor any of the
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses that, if the
subject of an unfavorable decision, ruling or finding, could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.
<PAGE>
-11-
(xxi) Neither the Company nor any of the Subsidiaries is in
violation of any law, ordinance, administrative or governmental rule or
regulation or court decree applicable to it or any of its properties or
assets, except for such violations that could not reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect.
(xxii) The Company and the Subsidiaries have good and
marketable title to all real and other property owned by the Company and
the Subsidiaries, in each case, after giving effect to the transactions
contemplated herein, free and clear of all mortgages, pledges, liens,
security interests, claims, restrictions or encumbrances of any kind,
except such as (a) are described in the Offering Memorandum or (b) do not,
individually or in the aggregate, materially affect the value of such
property and do not interfere with the use made and proposed to be made
(including the sale thereof) of such property by the Company or any of the
Subsidiaries; and all of the leases and subleases material to the business
of the Company and the Subsidiaries, considered as one enterprise, and
under which the Company or any of the Subsidiaries holds properties de
scribed in the Offering Memorandum, are in full force and effect, and
neither the Company nor any of the Subsidiaries has any written notice of
any material claim that has been asserted by anyone adverse to the rights
of the Company or any of the Subsidiaries under any of the leases or
subleases mentioned above.
(xxiii) The Company and the Subsidiaries have filed all federal,
state, local and foreign tax returns required to be filed or have duly
requested extensions thereof and have paid all taxes required to be paid by
any of them and any related assessments, fines or penalties, except for any
such tax, assessment, fine or penalty that is being contested in good faith
and by appropriate proceedings and for which adequate reserves have been
made in accordance with GAAP; and adequate charges, accruals and reserves
have been provided for in the financial statements included in the
Offering Memorandum in respect of all federal, state, local and foreign
taxes for all periods as to which the tax liability of the Company or any
of the Subsidiaries has not been finally determined or remains open to
examination by applicable taxing authorities.
(xxiv) Other than as disclosed in the Offering Memorandum,
none of the Company or the Subsidiaries have any
<PAGE>
-12-
profit sharing, deferred compensation, stock option, stock purchase or
similar plans or agreements evidencing rights to purchase securities or to
share in the profits of the Company or any of the Subsidiaries, which would
be required to be described in or included as an exhibit to a registration
statement on Form S-1 under the 1933 Act.
(xxv) Except as described in the Offering Memorandum and except
as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, (A) neither the Company nor any of
the Subsidiaries is in violation of, or has received any written notice
that it is subject to liability under, any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, or rule of common law and
any judicial or ad ministrative interpretation thereof including any
judicial or administrative order, decree, judgment or injunction, relating
to pollution or protection of human health or the environment (including,
without limitation, ambient air, indoor air, surface water, groundwater,
land surface or subsurface strata and natural resources), or wildlife,
including, without limitation, those relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances or constituents, petroleum or petroleum products or
any other substances or materials subject to regulation under
Environmental Laws (collectively, "Hazardous Materials") or to the
-------------------
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, "Environmental
-------------
Laws"), (B) the Company and the Subsidiaries have, or have filed timely
----
application for, all permits, licenses, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, (C) there are no pending or, to the knowledge of
the Company, threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance,
violation or potential responsibility or liability, investigation or
proceedings pursuant to any Environmental Law against the Company or any of
the Subsidiaries, and (D) there are no past or present events, conditions
or circumstances which would reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental agency, against or affecting, or requiring
capital or operating expenditures by, the Company or any of the
Subsidiaries pursuant to any Environmental Laws.
<PAGE>
-13-
(xxvi) Except as described in the Offering Memorandum, neither
the Company nor any of the Subsidiaries has incurred any liability for any
prohibited transaction or funding deficiency or any complete or partial
withdrawal liability with respect to any pension, profit sharing or other
plan which is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or the Subsidiaries makes
-----
or ever has made a contribution and in which any employee of the Company or
any such Subsidiary is or has ever been a participant, which in the
aggregate could reasonably be expected to have a Material Adverse Effect.
With respect to such plans, each of the Company and the Subsidiaries is in
compliance in all respects with all applicable provisions of ERISA, except
where the failure to so comply could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(xxvii) The Company is not, and upon the issuance and sale of
the Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Offering Memorandum, will not be, an
"investment company" or an entity "controlled" by an "investment company"
as such terms are defined in the Investment Company Act of 1940, as amended
(the "1940 Act").
--------
(xxviii) The Securities are eligible for resale pursuant to
Rule 144A and will not be, at the Closing Time, of the same class as
securities listed on a national securities exchange registered under
Section 6 of the Securities Exchange Act of 1934, as amended (the "1934
----
Act"), or quoted on a U.S. automated interdealer quotation system.
---
(xxix) None of the Company, its Affiliates (as defined in Rule
503 under the 1933 Act), or any person acting on its or any of their
behalf (other than the Initial Purchasers, as to which the Company makes no
representation) has engaged or will engage, in connection with the
offering of the Securities, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the 1933 Act or has
offered or will offer prior to the Closing Time (as defined in Section 2(b)
hereof) the Securities in any manner involving a public offering within the
meaning of Section 4(2) of the 1933 Act.
(xxx) Subject to compliance by the Initial Purchasers with
the representations and warranties contained in
<PAGE>
-14-
Section 2(c) and the procedures set forth in Section 6 hereof, it is not
necessary in connection with the offer, sale and delivery of the Securities
to the Initial Purchasers and to each Subsequent Purchaser in the manner
contemplated by this Agreement and the Offering Memorandum to register the
Securities under the 1933 Act or to qualify the Indenture under the 1939
Act.
(xxxi) With respect to those Securities sold in reliance on
Regulation S, (A) none of the Company, its Affiliates or any person acting
on its or their behalf (other than the Initial Purchasers, as to whom the
Company makes no representation) has engaged or will engage in any
directed selling efforts within the meaning of Regulation S and (B) each of
the Company and its Affiliates and any person acting on its or their behalf
(other than the Initial Purchasers, as to whom the Company makes no
representation) has complied and will comply with the offering
restrictions requirement of Regulation S.
(xxxii) Neither the consummation of the transactions
contemplated hereby nor the sale, issuance, execution or delivery of the
Securities, nor the application of the proceeds therefrom (if applied as
described in the Offering Memorandum under the caption "Use of Proceeds"),
will violate Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System, in each case as in effect, or as the same may
hereafter be in effect, at the Closing Time.
(xxxiii) Neither the Company nor any of the Subsidiaries nor
any of their respective directors, officers or controlling persons has
taken, directly or indirectly, any action designed, or which might
reasonably be expected to cause or result, under the 1934 Act, in, or which
has constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities, the Exchange Securities or the Private Exchange Securities.
(b) Any certificate signed by any officer of the Company or any of
the Subsidiaries delivered to the Initial Purchasers or to counsel for the
Initial Purchasers shall be deemed a representation and warranty by the Company
to each Initial Purchaser as to the matters covered thereby.
<PAGE>
-15-
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.
------------------------------------------------
(a) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
agrees to sell to each Initial Purchaser, severally and not jointly, and each
Initial Purchaser, severally and not jointly, agrees to purchase from the
Company, at the price set forth in Schedule B hereto, the aggregate principal
----------
amount of Securities set forth in Schedule A hereto opposite the name of such
----------
Initial Purchaser, plus any additional principal amount of Securities such
Initial Pur chaser may become obligated to purchase pursuant to the provisions
of Section 11 hereof.
(b) Payment of the purchase price for, and delivery of certificates
in definitive form for, the Securities shall be made at the offices of Mayer
Brown & Platt, 190 South LaSalle Street, Chicago, Illinois, or at such other
place as shall be agreed upon by Merrill Lynch and the Company, at 9:00 A.M.,
Central Standard Time, on November 5, 1997 (unless postponed in accordance with
the provisions of Section 11), or such other time not later than ten business
days after such date as shall be agreed upon by Merrill Lynch and the Company
(such time and date of payment and delivery being herein called the "Closing
-------
Time").
- ----
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery in
accordance with the DTC Agreement to Merrill Lynch for the respective accounts
of the Initial Purchasers of certificates for the Securities to be purchased
by them. It is understood that each Initial Purchaser has authorized Merrill
Lynch, for its account, to accept delivery of, receipt for, and make payment of
the purchase price for, the Securities which it has agreed to purchase. Merrill
Lynch, individually and not as representative of the Initial Purchasers, may
(but shall not be obligated to) make payment of the purchase price for the
Securities to be purchased by any Initial Purchaser whose funds have not been
received by, the Closing Time, but such payment shall not relieve such Initial
Purchaser from its obligations hereunder. The certificates representing the
Securities shall be registered in such names and in such denominations ($1,000
or integral multiples thereof) as the Initial Purchasers may request not later
than 10:00 A.M., New York City time, on the second business day prior to the
Closing Time and shall be made available for ex amination and packaging by the
Initial Purchasers in New York,
<PAGE>
-16-
New York not later than 10:00 A.M, New York City time, on the last business day
prior to the Closing Time.
(c) Each Initial Purchaser, severally and not jointly, represents and
warrants to, and agrees with, the Company that it is a "qualified institutional
buyer" within the meaning of Rule 144A under the 1933 Act (a "Qualified
---------
Institutional Buyer").
- -------------------
SECTION 3. Covenants of the Company. The Company covenants with
------------------------
each Initial Purchaser as follows:
(a) The Company has furnished or, as promptly as possible, will
furnish to each Initial Purchaser, without charge, such number of copies of
the Preliminary Offering Memorandum, the Final Offering Memorandum and any
amendments and supplements thereto as such Initial Purchaser may
reasonably request.
(b) The Company will immediately notify each Initial Purchaser, and
confirm such notice in writing, of (x) any filing made by the Company of
information relating to the offering of the Securities with any securities
exchange or any other regulatory body in the United States or any other
jurisdiction. If prior to the completion of the placement of the
Securities by the Initial Purchasers as evidenced by a notice in writing
from the Initial Purchasers to the Company (from the date hereof to such
completion, the "Offering Period"), any event shall occur as a result of
---------------
which it is necessary, in the reasonable opinion of the Company, its
counsel, the Initial Purchasers or counsel for the Initial Purchasers, to
amend or supplement the Offering Memorandum in order that the Offering
Memorandum not include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances then existing, not misleading or if, in the
opinion of the Company, its counsel, the Initial Purchasers, or counsel
for the Initial Purchasers, such amendment or supplement is necessary to
comply with applicable law, the Company will (subject to Section 3(c)
hereof) forthwith amend or supplement the Offering Memorandum by preparing
and furnishing to each Initial Purchaser an amendment or amendments of, or
a supplement or supplements to, the Offering Memorandum (in such number as
the Initial Purchasers may reasonably request), at its own expense, so
that, as so amended or supplemented, the Offering Memorandum will not
include an untrue statement of a material fact or
<PAGE>
-17-
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is
delivered to a Subsequent Purchaser, not misleading or so that the Offering
Memorandum, as so amended or supplemented, shall comply with applicable
law, as the case may be.
(c) The Company will advise each Initial Purchaser promptly of any
proposal to amend or supplement the Offering Memorandum during the
Offering Period and will not effect such amendment or supplement without
the prior written consent of the Initial Purchasers. Neither the consent
of the Initial Purchasers, nor the Initial Purchasers' delivery of any
such amendment or supplement, shall constitute a waiver of any of the
conditions set forth in Section 5 hereof.
(d) The Company will use its best efforts, in cooperation with the
Initial Purchasers, to qualify the Securities for offering and sale under
the applicable securities laws of such jurisdictions as the Initial
Purchasers may designate and will maintain such qualifications in effect
as long as required for the resale of the Securities by the Initial
Purchasers as contemplated herein; provided, however, that the Company
shall not be obligated to file any general consent to service of process or
to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject.
(e) The Company shall take all reasonable action necessary to enable
Standard & Poor's Ratings Group, a division of McGraw Hill, Inc. ("S&P"),
---
and Moody's Investors Service, Inc. ("Moody's") to provide their respective
-------
credit ratings of the Securities.
(f) The Company will cooperate with the Initial Purchasers and use
its best efforts to permit the Securities to be eligible for clearance and
settlement through the facilities of DTC and to be designated as "PORTAL
Securities" in accordance with the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD").
----
(g) The Company will use the net proceeds received by it from the
sale of the Securities in the manner specified in the Offering Memorandum
under the heading "Use of Proceeds."
<PAGE>
-18-
(h) The Company agrees that, in order to render the Securities
eligible for resale pursuant to Rule 144A under the 1933 Act, unless the
Company furnishes information to the Commission pursuant to Section 13 or
15(d) of the 1934 Act, so long as any of the Securities, including the Ex
change Securities and Private Exchange Securities, remain outstanding and
not subject to an effective registration statement under the 1933 Act, it
will make available, upon request, to any holder of Securities or
prospective pur chasers of Securities the information specified in Rule
144A(d)(4) (such information, whether made available to holders or
prospective purchasers or furnished to the Commission, is herein referred
to as "Additional Information").
-----------------------
(i) In connection with the original distribution of the Securities,
the Company agrees that, prior to any offer or resale of the Securities by
the Initial Purchasers, the Initial Purchasers and counsel for the Initial
Purchasers shall have the right to make reasonable inquiries into the
business of the Company and the Subsidiaries. The Company also agrees to
provide answers to each prospective Subsequent Purchaser of Securities who
so requests concerning the Company and the Subsidiaries (to the extent
that such information is available or can be acquired and made available
to prospective Subsequent Purchasers without unreasonable effort or
expense and to the extent the provision thereof is not prohibited by
applicable law and would not involve the disclosure of confidential
information of the Company) and the terms and conditions of the offering
of the Securities, as provided in the Offering Memorandum.
(j) Until the expiration of two years after the original issuance of
the Securities, the Company will not, and will cause its Affiliates not to,
purchase or agree to purchase or otherwise acquire any Securities which are
"restricted securities" (as such term is defined under Rule 144(a)(3) under
the 1933 Act), whether as beneficial owner or otherwise (except as agent
acting as a securities broker on behalf of and for the account of customers
in the ordinary course of business in unsolicited broker's transactions)
unless, upon any such purchase, the Company or any such Affiliate shall
submit such Securities to the Trustee for cancellation.
(k) During a period of 180 days from the date of the Offering
Memorandum, the Company will not, without the
<PAGE>
-19-
prior written consent of Merrill Lynch, directly or indirectly, issue,
sell, offer or agree to sell, grant any option for the sale of, or
otherwise dispose of, any other debt securities of the Company or
securities of the Company convertible into, or exchangeable for, the
Securities or such other debt securities, except for the Exchange
Securities and the Private Exchange Securities.
SECTION 4. Payment of Expenses.
-------------------
(a) The Company will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the preparation, printing
and any filing of the Preliminary Offering Memorandum and the Final Offering
Memorandum (including financial statements and any schedules or exhibits) and
of each amendment or supplement thereto, (ii) the photocopying or printing and
delivery to the Initial Purchasers of this Agreement, any Agreement among
Initial Purchasers, the Indenture, the Registration Rights Agreement and such
other documents as may be required in connection with the offering, purchase,
sale and delivery of the Securities, the Exchange Securities and the Private
Exchange Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities, the Exchange Securities and the Private
Exchange Securities to the Initial Purchasers, including any charges of DTC in
connection therewith, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(d) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Initial Purchasers in connection therewith and in connection with the
preparation of the Blue Sky Survey, any supplement thereto and any Legal
Investment Survey, (vi) the reasonable fees and expenses of the Trustee,
including the reasonable fees and disbursements of counsel for the Trustee in
connection with the Indenture and the Securities, the Exchange Securities and
the Private Exchange Securities, (vii) any fees payable in connection with the
rating of the Securities, (viii) all expenses and fees in connection with the
application for designation by the NASD of the Securities as PORTAL securities
(ix) and one half of all expenses (including travel expenses) of the Company in
connection with any meetings with prospective investors in the Securities.
(b) If this Agreement is terminated by Merrill Lynch in accordance
with the provisions of Section 5 hereof or Section 10(a)(i) hereof, the Company
shall reimburse the Initial Purchasers for all of their reasonable out-of-pocket
expenses,
<PAGE>
-20-
including the reasonable fees and disbursements of counsel for the Initial
Purchasers. The Company shall not in any event be liable to the Initial
Purchasers for the loss of anticipated profits from the transactions
contemplated by this Agreement.
SECTION 5. Conditions of Initial Purchasers' Obligations. The
---------------------------------------------
obligations of the several Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any of the
Subsidiaries delivered pursuant to the provisions hereof as of the date of this
Agreement and the Closing Time, to the performance by the Company of its
covenants and other obligations hereunder, and to the following further
conditions:
(a) At the Closing Time, the Representatives shall have received the
favorable opinion, dated as of the Closing Time, of each of John Funk, General
Counsel of the Company (with respect to the matters set forth in paragraphs
(iii) through (v), paragraph (xii), paragraph (xvii) and the penultimate
paragraph of Exhibit A hereto) and Mayer Brown & Platt, special counsel for the
Company (with respect to the matters set forth in paragraphs (i) and (ii),
paragraphs (vi) through (xi), paragraphs (xiii) through (xvi), paragraphs
(xviii) through (xx) and the penultimate paragraph of Exhibit A hereto), in form
and substance satisfactory to counsel for the Initial Purchasers, together with
signed or reproduced copies of each such letter for each of the other Initial
Purchasers, to the effect substantially set forth in Exhibit A hereto.
---------
(b) At the Closing Time, the Representatives shall have received the
favorable opinion, dated as of the Closing Time, of Cahill Gordon & Reindel,
counsel for the Initial Purchasers, together with signed or reproduced copies
of such letter for each of the other Initial Purchasers, with respect to the
matters set forth in paragraphs (vii) through (xi), inclusive, paragraph
(xviii) and the penultimate paragraph of Exhibit A hereto. In giving such
---------
opinion, such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of New York, the federal law of
the United States and the General Corporation Law of the State of Delaware, upon
the opinions of counsel satisfactory to the Representatives. Such counsel may
also state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company and the Subsidiaries and certificates of public officials.
<PAGE>
-21-
(c) At the Closing Time, there shall not have been, since the date
hereof or since the respective dates as of which information is given in the
Offering Memorandum, any Material Adverse Change, and the Initial Purchasers
shall have received a certificate of the President or a Vice President of the
Company and of the chief financial or chief accounting officer of the Company,
dated as of the Closing Time, to the effect that (i) there has been no such
Material Adverse Change, (ii) the representations and warranties in Section 1
hereof are true and correct with the same force and effect as though expressly
made at and as of the Closing Time and (iii) the Company has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Time.
(d) At the time of the execution of this Agreement, the Initial
Purchasers shall have received from each of Arthur Andersen LLP and McGladrey &
Pullen, LLP a letter dated such date, in form and substance satisfactory to the
Initial Purchasers and counsel for the Initial Purchasers, together with signed
or reproduced copies of such letter for each of the other Initial Purchasers,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to Initial Purchasers with respect to the
financial statements and certain financial information contained in the Offering
Memorandum.
(e) At the Closing Time, the Representatives shall have received from
each of Arthur Andersen LLP and McGladrey & Pullen, LLP a letter, dated as of
the Closing Time, in form and substance satisfactory to the Initial Purchasers
and counsel for the Initial Purchasers, to the effect that they reaffirm the
statements made in their respective letters furnished pursuant to subsection
(d) of this Section 5, except that the specified date referred to shall be a
date not more than three business days prior to the Closing Time.
(f) At the Closing Time, the Securities shall be rated at least B2 by
Moody's and B by S&P, and the Company shall have delivered to the Initial
Purchasers a letter dated the Closing Time, from each such rating agency, or
other evidence satisfactory to the Representatives, confirming that the
Securities have such ratings; and since the date of this Agreement, there shall
not have occurred any downgrading in the rating assigned to the Securities or
any of the Company's other securities by any nationally recognized securities
rating agency, and no such securities rating agency shall have publicly
announced that it has under surveillance or review, with
<PAGE>
-22-
possible negative implications, its rating of the Securities or any of the
Company's other securities.
(g) At the Closing Time, the Securities shall have been designated
for trading on PORTAL.
(h) The Company and the Trustee shall have entered into the
Indenture.
(i) The Company and the Initial Purchasers shall have entered into
the Registration Rights Agreement.
(j) At the Closing Time, counsel for the Initial Purchasers shall
have been furnished with such documents and opinions as they may reasonably
require for the purpose of enabling them to pass upon the issuance and sale of
the Securities as herein contemplated, or in order to evidence the accuracy of
any of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Securities as herein contemplated
shall be reasonably satisfactory in form and substance to the Initial Purchasers
and counsel for the Initial Purchasers.
If any condition specified in this Section 5 shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by Merrill Lynch by notice to the Company at any time at or prior to the Closing
Time, and such termination shall be without liability of any party to any other
party except as provided in Section 4 and except that Sections 1, 7, 8, 12, 13
and 14 shall survive any such termination and remain in full force and effect.
SECTION 6. Subsequent Offers and Resales of the Securities.
-----------------------------------------------
(a) Each of the Initial Purchasers and the Company hereby establish
and agree to observe the following procedures in connection with the offer and
sale by the Initial Purchasers of the Securities:
(i) Offers and sales of the Securities will be made only by the
Initial Purchasers or affiliates thereof qualified to do so in the
jurisdictions in which such offers or sales are made. Each such offer or
sale shall only be made (A), in the case of Securities resold or otherwise
transferred pursuant to Rule 144A, to persons whom the offeror or seller
reasonably believes to be Qualified
<PAGE>
-23-
Institutional Buyers or (B) to non-U.S. persons outside the United States
to whom the offeror or seller reasonably believes offers and sales of the
Securities may be made in reliance upon Regulation S under the 1933 Act.
(ii) The Securities will be offered by approaching prospective
Subsequent Purchasers on an individual basis. No general solicitation or
general advertising (within the meaning of Rule 502(c) under the 1933 Act)
will be used in the United States in connection with the offering of the
Securities.
(iii) In the case of a non-bank Subsequent Purchaser of a
Security acting as a fiduciary for one or more third parties, in connection
with an offer and sale to such purchaser pursuant to clause (i) above,
each third party shall, in the judgment of the applicable Initial Pur
chaser, be a Qualified Institutional Buyer or a non-U.S. person outside the
United States.
(iv) Each Initial Purchaser acknowledges and will take
reasonable steps to inform, and cause each of its United States affiliates
to take reasonable steps to inform, persons acquiring Securities from such
Initial Purchaser or affiliate, as the case may be, in the United States
that the Securities (A) have not been and will not be registered under the
1933 Act, (B) are being sold to them without registration under the 1933
Act in reliance on Rule 144A or Regulation S under the 1933 Act and (C) may
not be offered, sold or otherwise transferred prior to (x) the date which
is two years (or such shorter time as is permitted by Rule 144(k) under the
1933 Act or any successor provision thereunder) after the later of the
date of the original issue of the Securities and the last date on which the
Company or any affiliate of the Company was the owner of such Securities or
any predecessor thereto or (y) such later date, if any, as may be required
by applicable law, except (1) to the Company, (2) for so long as such
Securities are eligible for resale pursuant to Rule 144A, to a person it
reasonably believes is a Qualified Institutional Buyer that purchases such
Securities for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the transfer is being made
in reliance on Rule 144A, (3) pursuant to offers and sales to persons who
are not U.S. Persons (as defined in Regulation S under the 1933 Act) that
occur outside the United States pursuant to Regulation S under the 1933
Act, (4) pursuant to an effective registration state-
<PAGE>
-24-
ment under the 1933 Act or (5) pursuant to another available exemption
from the registration requirements of the 1933 Act.
(v) No sale of the Securities to any one Subsequent Purchaser
will be for less than $100,000 principal amount and no Security will be
issued in a smaller principal amount. If any Subsequent Purchaser is a
non-bank fiduciary acting on behalf of others, each person for whom it is
acting must purchase at least $100,000 principal amount of the Securities.
(vi) The transfer restrictions and the other provisions set
forth in the Indenture, including the legend required thereby, shall apply
to the Securities except as otherwise agreed by the Company and the Initial
Purchasers. Following the sale of the Securities by the Initial
Purchasers to Subsequent Purchasers pursuant to and in compliance with the
terms hereof, the Initial Purchasers shall not be liable or responsible to
the Company for any losses, damages or liabilities suffered or incurred by
the Company, including any losses, damages or liabilities under the 1933
Act, arising from or relating to any resale or transfer of any Security
occurring after such sale by the Initial Purchasers.
(vii) Each Initial Purchaser will deliver to each purchaser of
the Securities from such Initial Purchaser, in connection with its original
distribution of the Securities, a copy of the Offering Memorandum, as
amended and supplemented at the date of such delivery.
(b) Each Initial Purchaser understands that the Securities have not
been and will not be registered under the 1933 Act and may not be offered or
sold within the United States or to, or for the account or benefit of, U.S.
persons except in accordance with Regulation S or Rule 144A under the 1933 Act
or pursuant to an exemption from the registration requirements of the 1933 Act.
Each Initial Purchaser represents and agrees, that, except as permitted by
Section 6(a) above, it has offered and sold Securities and will offer and sell
Securities (i) as part of its distribution at any time and (ii) otherwise
until forty days after the later of the date upon which the offering of the
Securities commences and the Closing Time, only in accordance with Rule 903 of
Regulation S or Rule 144A under the 1933 Act. Accordingly, neither the Initial
Purchasers, their affiliates nor any persons acting on their behalf have
engaged or will engage in any directed selling efforts
<PAGE>
-25-
with respect to Securities, and the Initial Purchasers, their affiliates and any
person acting on their behalf have complied and will comply with the offering
restriction requirements of Regulation S. Each Initial Purchaser agrees that, at
or prior to confirmation of a sale of Securities (other than a sale of
Securities pursuant to Rule 144A), it will have sent to each distributor, dealer
or person receiving a selling concession, fee or other remuneration that
purchases Securities from it or through it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under
the United States Securities Act of 1933 (the "Securities Act")
--------------
and may not be offered or sold within the United States or to or
for the account or benefit of U.S. persons (i) as part of their
distribution at any time and (ii) otherwise until forty days
after the later of the date upon which the offering of the
Securities commenced and the date of closing, except in either
case in accordance with Regulation S or Rule 144A under the
Securities Act. Terms used above have the meaning given to them
by Regulation S."
Terms used in the above paragraph have the meanings given to them by Regulation
S.
Each Initial Purchaser severally represents and agrees that it has not
entered and will not enter into any contractual arrangements with respect to
the distribution of the Securities, except with its affiliates or with the prior
written consent of the Company.
SECTION 7. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each Initial
Purchaser and each person, if any, who controls any Initial Purchaser within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as
follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Offering Memorandum or the Final Offering Memorandum (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make
<PAGE>
-26-
the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided, however, that (subject to
Section 7(d) below) any such settlement is effected with the written
consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the reasonable fees and disbursements of counsel chosen as
provided in Section 7(c) below), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue state ment or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum (or any amendment or supplement thereto) and provided, further, that
this indemnity agreement shall not inure to the benefit of any Initial Purchaser
from whom the person asserting any such loss, liability, claim, damage or
expense purchased Securities, or any person controlling such Initial Purchaser,
if a copy of the Final Memorandum (or the Final Memorandum as amended or
supplemented) was not sent or given by or on behalf of the Initial Purchasers
(and the Company shall have timely furnished the Initial Purchasers with
sufficient copies thereof) to such person at or prior to the time of delivery of
written confirmation of the sale of the Securities to such person and if the
Final Memorandum (or the Final Memorandum as amended or supplemented) corrected
the untrue statement or omission giving rise to such loss, liability, claim,
damage or expense.
<PAGE>
-27-
(b) Each Initial Purchaser severally agrees to indemnify and hold
harmless the Company, its directors and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section 7, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Preliminary Offering Memorandum or
the Final Offering Memorandum (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Initial Purchaser through Merrill Lynch expressly for use in the
Preliminary Offering Memorandum or the Final Offering Memorandum (or any
amendment or supple ment thereto).
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve such indemnifying party
from any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which
it may have otherwise than on account of this indemnity agreement. In the case
of parties indemnified pursuant to Section 7(a) above, counsel to the
indemnified parties shall be selected by Merrill Lynch, and, in the case of
parties indemnified pursuant to Section 7(b) above, counsel to the indemnified
parties shall be selected by the Company. An indemnifying party may participate
at its own expense in the defense of any such action; provided, however, that
counsel to the indemnifying party shall not (except with the consent of the
indemnified party) also be counsel to the indemnified party. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 7 or Section 8 hereof (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) in-
<PAGE>
-28-
cludes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel to which such indemnified party is entitled pursuant to Section 7(a) or
(b), such indemnifying party agrees that it shall be liable for any settlement
of the nature contemplated by Section 7(a)(ii) effected without its written
consent if (i) such settlement is entered into more than 45 days after receipt
by such indemnifying party of the aforesaid request, (ii) such indemnifying
party shall have received notice of the terms of such settlement at least 30
days prior to such settlement being entered into and (iii) such indemnifying
party shall not have reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.
SECTION 8. Contribution. If the indemnification provided for in
------------
Section 7 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Initial Purchasers on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company, on the one hand, and
the Initial Purchasers, on the other hand, in connection with the offering of
the Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses)
<PAGE>
-29-
received by the Company, and the total discount received by the Initial
Purchasers, bear to the aggregate initial offering price of the Securities.
The relative fault of the Company, on the one hand, and the Initial
Purchasers, on the other hand, shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Initial Purchasers agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 8. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 8 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 8, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities purchased by it and offered to Subsequent
Purchasers exceeds the amount of any damages which such Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each director of the Company and each person, if any, who
controls
<PAGE>
-30-
the Company within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as the Company. The
Initial Purchasers' respective obligations to contribute pursuant to this
Section 8 are several in proportion to the principal amount of Securities set
forth opposite their respective names in Schedule A hereto and not joint.
----------
SECTION 9. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement or in certificates of officers of the Company submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Initial Purchaser or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the Initial Purchasers.
SECTION 10. Termination of Agreement.
------------------------
(a) Merrill Lynch may terminate this Agreement, by notice to the
Company, at any time at or prior to the Closing Time (i) if there has been,
since the time of execution of this Agreement or since the respective dates as
of which information is given in the Offering Memorandum, any Material Adverse
Change, (ii) if there has occurred any material adverse change in the financial
markets in the United States, any outbreak of hostilities or escalation thereof
or other calamity or crisis or any change or development involving a prospective
change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of Merrill Lynch, impracticable to market the Securities or to enforce
contracts for the sale of the Securities, (iii) if trading in any securities of
the Company has been suspended or limited by the Commission, if trading
generally on the American Stock Exchange or the New York Stock Exchange or in
the Nasdaq National Market System has been suspended or limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices have
been required, by any of said exchanges or by such system or by order of the
Commission, the NASD or any other governmental authority, or (iv) if a banking
moratorium has been declared by either Federal or New York authorities.
(b) If this Agreement is terminated pursuant to this Section 10, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof, and provided further that Sections 1, 7, 8, 12, 13
and
<PAGE>
-31-
14 shall survive such termination and remain in full force and effect.
SECTION 11. Default by One of the Initial Purchasers. If one of the
-----------------------------------------
Initial Purchasers shall fail at the Closing Time to purchase the Securities
which it is obligated to purchase under this Agreement (the "Defaulted
---------
Securities"), Merrill Lynch shall have the right, within 24 hours thereafter,
- ----------
to make arrangements for the non-defaulting Initial Purchaser, or any other
Initial Purchaser, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, Merrill Lynch shall not have completed such arrangements
within such 24-hour period, then this Agreement shall terminate without
liability on the part of the non-defaulting Initial Purchaser.
No action taken pursuant to this Section 11 shall relieve any
defaulting Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either Merrill Lynch or the Company shall have
the right to postpone the Closing Time for a period not exceeding seven days in
order to effect any required changes in the Offering Memorandum or in any other
documents or arrangements. As used herein, the term "Initial Purchaser"
-----------------
includes any person substituted for an Initial Purchaser under this Section 11.
SECTION 12. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to Merrill Lynch at North Tower, World Financial
Center, New York, New York 10281-1201, attention: High Yield Corporate Finance;
and notices to the Company shall be directed to it at 1004 East Illinois Street,
Assumption, Illinois 62510, attention: John W. Funk, Chief Financial Officer
and General Counsel, with a copy to Mayer Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois 60610, attention: Paul W. Theiss.
SECTION 13. Information Supplied by the Initial Purchasers. The
----------------------------------------------
statements set forth in the last paragraph on the cover page of the Offering
Memorandum, in the first paragraph on page i of the Offering Memorandum and in
the table and the third and fifth paragraphs under the heading "Plan of
<PAGE>
-32-
Distribution" in the Offering Memorandum constitute the only information
furnished by the Initial Purchasers to the Company for use in the Offering
Memorandum for the purposes of Sections 1, 7 and 8 hereof.
SECTION 14. Parties. This Agreement shall inure to the benefit of
-------
and be binding upon the Initial Purchasers and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Initial Purchasers and the Company and their respective successors and the
controlling persons and directors referred to in Sections 7 and 8 hereof and
their heirs and legal representatives, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be for
the sole and exclusive benefit of the Initial Purchasers and the Company and
their respective successors, and said controlling persons and directors and
their heirs and legal representatives, and for the benefit of no other person,
firm or corporation. No purchaser of Securities from any Initial Purchaser
shall be deemed to be a successor by reason merely of such purchase.
SECTION 15. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
----------------------
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. ALL SPECIFIED TIMES OF
DAY REFER TO NEW YORK CITY TIME.
SECTION 16. Effect of Headings. The Section headings herein are for
------------------
convenience only, and shall not affect the construction hereof.
SECTION 17. Counterparts. This Agreement may be executed in one or
------------
more counterparts and, when each party has executed a counterpart, all such
counterparts taken together shall constitute one and the same agreement.
[Signature Pages Follow]
<PAGE>
S-1
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Initial Purchasers and the Company in accordance with its
terms.
Very truly yours,
THE GSI GROUP, INC.
By: /s/ John W. Funk
----------------------------------------
Name: John W. Funk
Title: Executive V.P., CFO and Secretary
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:_____________________________
Name:
Title:
<PAGE>
S-1
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Initial Purchasers and the Company in accordance with its
terms.
Very truly yours,
THE GSI GROUP, INC.
By:________________________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Joseph B. Sheehan
------------------------------------
Name: Joseph B. Sheehan
Title: Vice President
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Principal
Amount of
Name of Initial Purchaser Securities
- ------------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................. $ 70,000,000
Morgan Stanley & Co. Incorporated......................... 30,000,000
----------
Total..................................................... $100,000,000
===========
</TABLE>
<PAGE>
SCHEDULE B
----------
THE GSI GROUP, INC.
$100,000,000 Senior Subordinated Notes Due 2007
1. The initial offering price of the Securities shall be 99.231% of
the principal amount thereof, plus accrued interest, if any, from the date of
issuance.
2. The purchase price to be paid by the Initial Purchasers for the
Securities shall be 96.481% of the principal amount thereof.
3. The interest rate on the Securities shall be 10-1/4% per annum.
4. The Securities will mature on November 1, 2007. Interest on the
Notes will be payable in arrears semi-annually on each May 1 and November 1,
commencing May 1, 1998.
5. The Securities will be redeemable at the option of the Company, in
whole or in part, at any time on or after November 1, 2002, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest thereon, if any, to the date of redemption, if
redeemed during the 12-month period beginning on November 1 of the years
indicated below:
REDEMPTION
YEAR PRICE
---- ----------
2002 105.188%
2003 103.458%
2004 101.729%
2005 and thereafter.............. 100.000%
6. On or prior to November 1, 2000, the Company may, at its option,
use the net proceeds of an Equity Offering (as defined in the Offering
Memorandum) to redeem up to 35% of the originally issued aggregate principal
amount of the Securities, at a redemption price in cash equal to 110.25% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the date of redemption; provided, however, that not less than $65.0 million in
aggregate principal amount of Securities is outstanding following such
redemption.
<PAGE>
Exhibit A
---------
FORM OF OPINIONS
TO BE DELIVERED PURSUANT TO
SECTION 5(a)
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum and to enter into and perform its obligations under the Operative
Documents.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in which
such qualification is required.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Offering Memorandum in the column entitled
"Actual" under the caption "Capitalization"; the shares of issued and
outstanding capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable.
(v) Each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Memorandum and is duly qualified as a foreign corporation to transact business
and is in good standing in each other jurisdiction in which such qualification
is required; all the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, are fully paid and non-
assessable and, to the best of our knowledge, are owned by the Company, directly
or indirectly, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(vi) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
A-1
<PAGE>
(vii) The Indenture has been duly authorized, executed and delivered
by the Company and (assuming the due authorization, execution and delivery
thereof by the Trustee) constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
(viii) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the Initial Purchasers) constitutes a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except (i) as the enforcement thereof may be limited
by bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws relating
to or affecting enforcement of creditors' rights generally, or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and (ii) as the enforcement of rights to
indemnification and contribution thereunder may be limited by federal or state
securities laws or regulations or the public policy underlying such laws or
regulations.
(ix) The Securities are in the form contemplated by the Indenture,
have been duly authorized by the Company and, when executed by the Company and
authenticated by the Trustee in the manner provided in the Indenture (assuming
the due authorization, execution and delivery of the Indenture by the Trustee)
and delivered against payment of the purchase price therefor, will constitute
valid and binding obligations of the Company entitled to the benefits of the
Indenture, enforceable against the Company in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally, or by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law).
A-2
<PAGE>
(x) The Exchange Securities and the Private Exchange Securities
have been duly authorized by the Company and, when executed by the Company and
authenticated in the manner provided for in the Indenture and delivered in
exchange for the Securities in accordance with the terms of the Registration
Rights Agreement, will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms and entitled to
the benefits of the Indenture, except as the enforcement thereof may be limited
by bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws relating
to or affecting enforcement of creditors' rights generally, or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(xi) The Securities, the Indenture and the Registration Rights
Agreement conform in all material respects to the descriptions thereof contained
in the Offering Memorandum.
(xii) The execution, delivery and performance of each of the
Operative Documents and the consummation of the transactions contemplated
thereby (including the issuance and sale of the Securities and the use of the
proceeds therefrom as described in the Offering Memorandum under the caption
"Use Of Proceeds") and compliance by the Company with its obligations thereunder
will not, whether with or without the giving of notice or lapse of time or
both, conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section l(a)(xvi) of the Purchase Agreement) under, or a violation
of, or result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any Subsidiary pursuant to, (i)
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or any other agreement or instrument, known to us, to which the
Company or any of the Subsidiaries is a party or by which it or any of them may
be bound, or to which any of the property or assets of the Company or any
Subsidiary is subject, (ii) the charter or bylaws of the Company or any of the
Subsidiaries, or (iii) any applicable law, statute, rule or regulation of the
United States, the State of New York or the State of Delaware, or any judgment,
order, writ or decree, known to us, of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of the Subsidiaries or any of their respective properties or
assets.
(xiii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree
A-3
<PAGE>
of, any court or governmental authority or agency is necessary or required in
connection with the offering, issuance or sale of the Securities, the Exchange
Securities or the Private Exchange Securities, the performance by the Company
of its obligations under the Operative Documents or the consummation of the
transactions contemplated thereby, except as may be required under the 1933
Act, under the 1939 Act or pursuant to state securities or "blue sky" laws, as
to which no opinion is rendered hereby.
(xiv) To the best of our knowledge, there is no pending or
threatened action, suit, proceeding, inquiry or investigation (collectively,
"Legal Proceedings"), to which the Company or any Subsidiary is a party, or to
- -------------------
which the property of the Company or any Subsidiary is subject, before or by any
court or governmental agency or body, which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets of the Company or any
Subsidiary or the consummation of the Purchase Agreement by the Company or its
obligations thereunder or the transactions contemplated by the Offering
Memorandum.
(xv) The information in the Offering Memorandum under the headings
"Business--Regulatory and Environmental Matters" and "Business--Product
Liability and Legal Proceedings," to the extent that it constitutes summaries of
legal matters, legal proceedings or legal conclusions, fairly summarizes such
matters in all material respects.
(xvi) All descriptions in the Offering Memorandum of contracts and
other documents to which the Company or any of the Subsidiaries is a party are
accurate in all material respects.
(xvii) To the best of our knowledge, there are no franchises,
contracts, indentures, mortgages, loan agreements, notes, leases or other
instruments that would be required to be described in a registration statement
on Form S-1 under the 1933 Act that are not described or referred to in the
Offering Memorandum.
(xviii) Assuming compliance by the Initial Purchasers with the
representations and warranties in Section 2(c) of the Purchase Agreement and the
procedures set forth in Section 6 of the Purchase Agreement, it is not necessary
in connection with the offer, sale and delivery of the Securities to the Initial
Purchasers and to each Subsequent Purchaser in the manner con-
A-4
<PAGE>
templated by the Purchase Agreement and the Offering Memorandum to register the
Securities under the 1933 Act or to qualify the Indenture under the 1939 Act.
(xix) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
(xx) Neither the consummation of the transactions contemplated
hereby nor the sale, issuance, execution or delivery of the Securities, nor the
application of the proceeds therefrom (if applied as described in the Offering
Memorandum under the caption "Use of Proceeds"), will violate Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System.
We have participated in conferences with officers and other
representatives of the Company, your representatives and representatives of the
independent accountants for the Company at which conferences the contents of the
Offering Memorandum and related matters were discussed. However, we do not
express an opinion with respect to, and do not assume any responsibility for,
the accuracy, completeness or fairness of the statements contained in the
Offering Memorandum or make any representation that we have independently
verified or checked the accuracy, completeness or fairness of such statements.
On the basis of and subject to the foregoing, we advise you that nothing has
come to our attention that has led us to believe that the Final Offering
Memorandum, as of its date or as of the date hereof, included or includes an
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that we express no belief with respect to the financial statements, including
the notes thereto, or any other financial or statistical data set forth or
referred to in the Offering Memorandum).
In rendering such opinion, such counsel may rely, as to matters of
fact (but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
A-5
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
THE GSI GROUP, INC.
This Amended and Restated Certificate of Incorporation, having been duly
adopted in accordance with the provisions of Section 245 of the General
Corporation Law of the State of Delaware amends and restates in its entirety the
certificate of incorporation of The GSI Group, Inc., which was originally
incorporated on April 30, 1964 as Sloan Implement Company, Inc.:
FIRST: The name of the corporation (hereinafter called the "Corporation")
is:
The GSI Group, Inc.
SECOND: The address, including street, number, city and county of the
registered office of the Corporation in the State of Delaware is 1013 Centre
Road, Wilmington, Delaware in the County of New Castle and the name of the
stock, $.01 par value, 1,100,000 shall be non-voting stock, $.01 par value, and
100,000 shall be preferred stock, $.01 par value. Shares of preferred stock will
be issued, from time to time, in one or more series, as authorized by the Board
of Directors of the Corporation (the "Board"). Prior to the issuance of shares
of each series, the Board by resolution shall (i) designate that series to
distinguish it from all other series and classes of stock of the Corporation;
(ii) specify the number of shares to be included in the series and shall set the
terms, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption. Subject to the express terms of any other series of
preferred stock outstanding at the time and notwithstanding any other provisions
of these ARTICLES, the Board may increase or decrease the number of shares of,
or alter the designations, classify or reclassify, any unissued shares of any
series of preferred stock by setting or changing, in any one or more respects,
from time to time before issuing the shares, the terms, preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications or terms or conditions of redemption of the
shares of any series of preferred stock. Any and all such shares issued, and for
which the full consideration has been paid or delivered, shall be deemed fully
paid stock and the holder of such shares shall not be liable for any further
call or assessment or any other payment thereon.
FIFTH: The books of the Corporation may be kept (subject to any provision
contained in the statutes) outside the State of Delaware at such place or places
as may be designated from time to time by the Board or in the By-Laws of the
Corporation.
<PAGE>
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 292 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation as the case may be,
and also on this Corporation.
SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and stockholders, it is
further provided:
The number of directors of the Corporation shall be as specified in the By-
Laws of the Corporation but such number may from time to time be increased
or decreased in such manner as may be prescribed by the By-Laws. In no
event shall the number of directors be less than the minimum prescribed by
law. The election of directors need not be by ballot, unless the By-Laws of
the Corporation so provide. Directors need not be stockholders.
In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware, the Board is expressly authorized and empowered to
make, alter, amend, and repeal By-Laws, subject to the power of the
stockholders to alter or repeal By-Laws made by the Board.
Any director or any officer elected or appointed by the stockholders or by
the Board may be removed at any time in such manner as shall be provided in
the By-Laws of the Corporation.
In the absence of fraud, no contract or other transaction between the
Corporation and any other corporation and no act of the Corporation, shall
in any way be affected or invalidated by the fact that any of the directors
of the Corporation are pecuniarily or otherwise interested in, or are
directors or officers of, such other Corporation; and in the absence of
fraud, any director, individually, or any firm of which any director may be
a member, may be a party to, or may be pecuniarily or otherwise interested
in, any contract or transaction of the Corporation; provided, in any case,
that the fact that he or such firm
2
<PAGE>
is so interested shall be disclosed or shall have been known to the Board
or the majority thereof; and any director of the Corporation, who is also a
director or officer of any such other Corporation, or who is also
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of the Corporation which shall authorize any such
contract, act or transaction, and may vote thereat to authorize any such
contract, act or transaction, with like force and effect as if he were not
such director or officer of such other corporation, or not so interested.
To the fullest extent permitted by the Delaware General Corporation Law as
it now exists or may hereafter be amended, no director of this Corporation
shall be liable to this Corporation or any of its stockholders for monetary
damages for breach of fiduciary duty as a director. If the General
Corporation Law of the State of Delaware is amended to authorize the
further elimination of liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on personal
liability for breach of fiduciary duty shall be limited to the furthest
extent permitted by an amended General Corporation Law of the State of
Delaware. Any repeal or modification of this Article SEVENTH by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of as director of
the Corporation existing at the time of such repeal or modification.
EIGHTH: (a) The Corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
The Corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
3
<PAGE>
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled in indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to under Paragraphs (a) and (b) of this
Article, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Any indemnification under paragraphs (a) and (b) (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in paragraphs (a) and (b). Such determination shall be made
(1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or by a
majority vote of a committee of such directors, or (2) if such a quorum is not
obtainable or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Expenses incurred in defending a civil or criminal action, suit, or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article EIGHTH.
The indemnification and advancement of expenses provided by or granted
pursuant to the other sections of this Article EIGHTH shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article EIGHTH.
For the purposes of this Article EIGHTH, reference to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any
4
<PAGE>
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers and employees or agents, so that any person
who is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise shall stand in the same position under the
provisions of this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
For the purposes of this Article EIGHTH, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer employee, or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article EIGHTH.
The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article EIGHTH shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
NINTH: From time to time any of the provisions of this Amended and Restated
Certificate of Incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this Certificate are granted subject to the provisions of this Article NINTH.
IN WITNESS WHEREOF, I have hereunto set my name on this ____ day of
_______________, 1997.
5
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
THE GSI GROUP, INC.
(A DELAWARE CORPORATION)
ADOPTED
OCTOBER 1, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. OFFICES 1
2. STOCKHOLDERS 1
2.1. ANNUAL MEETING 1
2.2. SPECIAL MEETINGS 1
2.3. PLACE OF MEETING 1
2.4. NOTICE OF MEETING 1
2.5. MEETING OF ALL STOCKHOLDERS 2
2.6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE 2
2.7. VOTING LISTS 2
2.8. QUORUM 2
2.9. PROXIES 3
2.10. VOTING OF SHARES 3
2.11. VOTING OF SHARES BY CERTAIN HOLDERS 3
2.12. INFORMAL ACTION BY STOCKHOLDERS 4
2.13. VOTING BY BALLOT 4
3. DIRECTORS 4
3.1. GENERAL POWERS 4
3.2. NUMBER, TENURE AND QUALIFICATION 4
3.3. REGULAR MEETINGS 4
3.4. SPECIAL MEETINGS 4
3.5. NOTICE 4
3.6. QUORUM 5
3.7. MANNER OF ACTING 5
3.8. VACANCIES 5
3.9. REMOVAL OF DIRECTORS 5
3.10. COMPENSATION 5
3.11. PRESUMPTION OF ASSENT 5
3.12. INFORMAL ACTION BY BOARD OF DIRECTORS 6
3.13. PARTICIPATION BY CONFERENCE TELEPHONE 6
3.14. COMMITTEES 6
3.15. DIRECTORS' PERSONAL LIABILITY 6
4. OFFICERS 7
4.1. NUMBER 7
4.2. ELECTION AND TERMS OF OFFICE 7
4.3. REMOVAL 7
4.4. VACANCIES 7
4.5. THE PRESIDENT 8
</TABLE>
i
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<TABLE>
<S> <C>
4.6. THE VICE PRESIDENTS 8
4.7. THE TREASURER 8
4.8. THE SECRETARY 9
4.9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES 9
4.10. SALARIES 9
5. INDEMNIFICATION OF OFFICERS AND DIRECTORS 9
5.1. ACTIONS AGAINST A PERSON 9
5.2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION 10
5.3. INDEMNIFICATION IN EVENT OF SUCCESSFUL DEFENSE 10
5.4. BOARD OF DIRECTORS' APPROVAL 10
5.5. ADVANCE INDEMNITY PAYMENTS 11
5.6. NON-EXCLUSIVITY 11
5.7. INDEMNITY INSURANCE 11
5.8. CONSOLIDATION 11
5.9. CONTRACTS, LOANS, CHECKS AND DEPOSITS 12
5.10. CONTRACTS 12
5.11. LOANS 12
5.12. CHECKS, DRAFTS, ETC. 12
5.13. DEPOSITS 12
6. CERTIFICATES FOR SHARES AND THEIR TRANSFER 12
6.1. CERTIFICATES FOR SHARES 12
6.2. TRANSFER OF SHARES 13
7. FISCAL YEAR 13
8. DIVIDENDS 13
9. SEAL 13
10. WAIVER OF NOTICE 14
11. AMENDMENTS TO THE BY-LAWS 14
</TABLE>
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THE GSI GROUP, INC. BY-LAWS
ARTICLE
1
OFFICES
-------
The principal office of the Corporation shall be in the State of Illinois,
in the City of Assumption, County of Christian. The Corporation may have such
other offices, either within or without the State of Illinois, as the business
of the Corporation may require from time to time.
The registered office of the Corporation required by the General
Corporation Law of Delaware to be maintained in the State of Delaware shall be
1013 Centre Road, Wilmington, DE 19805. The name of the registered agent of the
Corporation in Delaware shall be Corporation Service Company.
ARTICLE
2
STOCKHOLDERS
------------
2.1. ANNUAL MEETING. The annual meeting of the stockholders shall be held
--------------
not less than thirty (30) days after delivery of the Corporation's annual
report, but within six (6) months after the end of each fiscal year, said date
to be fixed by the Board of Directors, at such hour as shall be designated in
the notice of the meeting for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a weekend or a legal holiday, such meeting
shall be held on the next succeeding business day.
2.2. SPECIAL MEETINGS. Special meetings of the stockholders may be called
----------------
by the Chief Executive Officer, by the Board of Directors, or by the holders of
not less than one-tenth of all the outstanding shares of the Corporation.
2.3. PLACE OF MEETING. The Board of Directors may designate any place,
----------------
either within or without the State of Delaware, as the place of meeting for any
annual stockholder meeting or for any special stockholder meeting called by the
Board of Directors. A waiver of notice signed by all stockholders may designate
any place, either within or without the State of Delaware, as the place for the
holding of such meeting.
2.4. NOTICE OF MEETING. Written or printed notice stating the place, day
-----------------
and hour of the meeting, and in the case of a special meeting, the purposes for
which the meeting is called, shall be delivered not less than ten nor more than
sixty days before the date of the meeting, or in the case of a merger or
consolidation not less than twenty nor more than sixty days before the meeting,
either personally or by mail, by or at the direction of the Chief Executive
Officer, or the Secretary, or the officer or persons calling the meeting, to
each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid.
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THE GSI GROUP, INC. BY-LAWS
2.5. MEETING OF ALL STOCKHOLDERS. If all of the stockholders shall meet at
---------------------------
any time and place, either within or without the State of Delaware, and consent
to the holding of a meeting at such time and place, such meeting shall be valid
without call or notice, and at such meeting any corporate action may be taken.
2.6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose
--------------------------------------------------
of determining stockholders entitled to notice of or to vote at any meeting of
stockholders, or stockholders entitled to receive payment of any dividend, or in
order to make a determination of stockholders for any other proper purpose, the
Board of Directors of the Corporation may provide that the stock transfer books
shall be closed for a stated period but not to exceed, in any case, sixty days.
If the stock transfer books shall be closed for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders, such
books shall be closed for at least ten days, or in the case of a merger or
consolidation, at least twenty days, immediately preceding such meeting. In
lieu of closing the stock transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination of stockholders,
such date in any case to be not more than sixty days and, for a meeting of
stockholders, not less than ten days, or in the case of a merger or
consolidation, not less than twenty days, immediately preceding such meeting.
If the stock transfer books are not closed and no record date is fixed for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders, or stockholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of stockholders.
2.7. VOTING LISTS. The officer or agent having charge of the transfer
------------
books for shares of the Corporation shall make at least ten days before each
meeting of stockholders, a complete list of the stockholders entitled to vote at
such meeting, arranged in alphabetical order, with the address of and the number
of shares held by each, which list, for a period of ten days prior to such
meeting, shall be kept on file at the registered office of the Corporation and
shall be subject to inspection by any stockholder at any time during usual
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any stockholder during the
whole time of the meeting. The original share ledger or transfer book, or a
duplicate thereof kept in this State, shall be prima facie evidence as to who
are the stockholders entitled to examine such list or share ledger or transfer
book or to vote at any meetings of stockholders.
2.8. QUORUM. Subject to any provision of the Delaware General Corporate
------
Law in respect of the vote that shall be required for a specified action, a
majority of the outstanding shares of voting common stock of the Corporation,
represented in person or by proxy, shall constitute a quorum at any meeting of
stockholders; provided, that if less than a majority of the outstanding voting
shares are represented at said meeting, a majority of the shares so represented
may adjourn the meeting from time to time without further notice; provided
further that if any provision of the Delaware General Corporation Law shall
specify the vote required for a specified action, the number of shares of voting
common stock of the Corporation, represented in person or by proxy, shall
constitute a quorum at any meeting of stockholders. If a quorum is
2
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THE GSI GROUP, INC. BY-LAWS
present, the affirmative vote of the majority of the voting shares represented
at the meeting shall be the act of the stockholders, unless the vote of a
greater number is required by the Delaware General Corporation Law or the
Amended and Restated Certificate of Incorporation.
2.9. PROXIES. At all meetings of stockholders, a stockholder may vote by
-------
proxy executed in writing by the stockholder or by his duly authorized attorney-
in-fact. Such proxy shall be filed with the Secretary of the Corporation before
or at the time of the meetings. No proxy shall be valid after eleven months
from the date of its execution, unless otherwise provided in the proxy.
2.10. VOTING OF SHARES. Subject to the provisions of Section 2.12 of
----------------
these By-Laws, each outstanding share, regardless of class, shall be entitled to
one vote upon each matter submitted to vote at a meeting of stockholders.
2.11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name of
-----------------------------------
another corporation, domestic or foreign, may be voted by such officer, agent or
proxy as the By-Laws of such corporation may prescribe, or, in the absence of
such provision, as the Board of Directors of such corporation may determine.
Shares standing in the name of a deceased person may be voted by his
administrator or executor, either in person or by proxy. Shares standing in the
name of a guardian, conservator or trustee may be voted by such fiduciary,
either in person or by proxy, but no guardian, conservator or trustee shall be
entitled, as such fiduciary, to vote shares held by him without a transfer of
such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred,
unless otherwise provided by such parties.
Shares of its own stock belonging to this corporation shall not be voted,
directly or indirectly, at any meeting and shall not be counted in determining
the total number of outstanding shares at any given time.
2.12. INFORMAL ACTION BY STOCKHOLDERS. Any action required to be taken at
-------------------------------
any annual or special meeting of the stockholders, or any other action which may
be taken at any annual or special meeting of the stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without
3
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THE GSI GROUP, INC. BY-LAWS
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
2.13. VOTING BY BALLOT. Voting on any question or in any election may be
----------------
viva voce unless the presiding officer shall order or any stockholder shall
demand that voting be by ballot.
ARTICLE
3
DIRECTORS
---------
3.1. GENERAL POWERS. The business and affairs of the Corporation shall be
--------------
managed by or under the direction of its Board of Directors.
3.2. NUMBER, TENURE AND QUALIFICATION. The number of directors of the
--------------------------------
Corporation shall be four (4). Each director shall hold office until the next
annual meeting of stockholders or until his successor shall have been duly
elected and qualified. Directors need not be residents of Delaware or
stockholders of the Corporation.
3.3. REGULAR MEETINGS. A regular meeting of the Board of Directors shall
----------------
be held without other notice than this By-Law, immediately after, and at the
same place as, the annual meeting of stockholders. The Board of Directors may
provide, by resolution, the time and place, either within or without the State
of Delaware, for the holding of additional regular meetings without other notice
than such resolution.
3.4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
----------------
called by or at the request of the Chief Executive Officer or any two directors.
The person or persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the State of Delaware, as
the place for holding any special meeting of the Board of Directors called by
them.
3.5. NOTICE. Notice of any special meeting shall be given at least five
------
days previous thereto by written notice delivered personally or mailed to each
director at his business address, or by telegram. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice be given by telegram, such notice shall
be deemed to be delivered when the telegram is delivered to the telegraph
company. Any director may waive notice of any meeting. The attendance of a
director at any meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
3.6. QUORUM. A majority of the number of directors fixed by these By-Laws
------
shall constitute a quorum for the transaction of business at any meeting of the
Board of Directors,
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THE GSI GROUP, INC. BY-LAWS
provided, that if less than a majority of such number of directors are present
at said meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice.
3.7. MANNER OF ACTING. The act of the majority of the directors present at
----------------
a meeting at which a quorum is present shall be the act of the Board of
Directors; provided that, in the event that any matter to be voted on by the
Board shall be equally divided, the deadlock shall be resolved by the director
serving as the Chief Executive Officer.
3.8. VACANCIES. Any vacancy occurring in the Board of Directors and any
---------
directorship to be filled by reason of an increase in the number of directors
may be filled by the unanimous vote of the stockholders at a special meeting
called for such purpose. Any director elected to such vacancy shall hold office
until the next annual meeting of stockholders.
3.9. REMOVAL OF DIRECTORS. Any director or the entire Board of Directors
--------------------
of this corporation may be removed with or without cause at any annual or
special meeting of stockholders by the holders of a majority of the shares then
entitled to vote at an election of directors.
3.10. COMPENSATION. The Board of Directors, by the affirmative vote of a
------------
majority of directors then in office, and irrespective of any personal interest
of any of its members, shall have authority to establish reasonable compensation
of all directors for services to the Corporation as directors. By resolution of
the Board of Directors, the directors may be paid their expenses, if any, of
attendance at each meeting of the Board. In the event the Internal Revenue
Service shall deem any compensation (including any fringe benefit) paid to a
director to be unreasonable or excessive, such director must repay to the
Corporation the excess over what is determined by the Internal Revenue Service
to be reasonable compensation, with interest on such excess at the rate of nine
percent (9%) per annum, within ninety days after notice from the Corporation.
3.11. PRESUMPTION OF ASSENT. A director of the Corporation who is present
---------------------
at a meeting of the Board of Directors at which action on any corporate matter
is taken shall be conclusively presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
3.12. INFORMAL ACTION BY BOARD OF DIRECTORS. Any action required or
-------------------------------------
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board or
committee consent thereto in writing and all such writings are filed with the
minutes of proceedings of the Board or committee.
3.13. PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board of
-------------------------------------
Directors or of any committee designated by the Board of Directors may
participate in a meeting
5
<PAGE>
THE GSI GROUP, INC. BY-LAWS
of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in such meeting shall constitute
attendance and presence in person at the meeting of the person or persons so
participating.
3.14. COMMITTEES. The Board of Directors may, by resolution passed by a
----------
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, or in these By-Laws, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation by the Board of Directors, adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the By-Laws of the Corporation; and,
unless the Board of Directors, By-Laws or Certificate of Incorporation expressly
so provide, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock, or to adopt a Certificate of
Ownership and Merger.
3.15. DIRECTORS' PERSONAL LIABILITY. As provided in the Corporation's
-----------------------------
Certificate of Incorporation, no director shall be personally liable to the
Corporation or any stockholder for monetary damages for breach of fiduciary duty
as a director; provided, however, that the foregoing provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of Title 8 of the Delaware
Code (relating to the Delaware General Corporation Law) or any amendment thereto
or successor provision thereto, or (iv) for any transaction from which the
director derived an improper personal benefit. Neither the amendment nor the
repeal of this provision in the Corporation's Certificate of Incorporation, nor
the adoption of any provision to the Certificate of Incorporation inconsistent
with this provision, shall eliminate or reduce the effect of this provision in
respect of any matter occurring, or any cause of action, suit or claim that, but
for this provision, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision. If the Delaware General Corporation Law
is amended to authorize the further elimination of liability of directors, then
the liability of a director of the Corporation, in addition to the limitation on
personal liability for breach of fiduciary duty shall be limited to the furthest
extent permitted by an amended Delaware General Corporation Law. Any repeal or
modification of this Article 3 by the stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the
6
<PAGE>
THE GSI GROUP, INC. BY-LAWS
personal liability of a director of the Corporation existing at the time of
such repeal or modification.
ARTICLE
4
OFFICERS
--------
4.1. NUMBER. The officers of the Corporation shall be a Chairman of the
------
Board, a Chief Executive Officer, a President, a Treasurer, and a Secretary, and
such Vice Presidents (the number thereof to be determined by the Board of
Directors), Assistant Treasurers, Assistant Secretaries or other officers as may
be elected or appointed by the Board of Directors. Any two or more offices may
be held by the same person.
4.2. ELECTION AND TERMS OF OFFICE. The officers of the Corporation shall
----------------------------
be elected annually by the Board of Directors at the first meeting of the Board
of Directors held after each annual meeting of stockholders. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as conveniently may be. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided. Election or appointment of an officer or agent shall not
of itself create contract rights.
4.3. REMOVAL. Any officer or agent elected or appointed by the Board of
-------
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
4.4. VACANCIES. A vacancy in any office because of death, resignation,
---------
removal, disqualification or otherwise, or because of the creation of an office,
may be filled by the Board of Directors for the unexpired portion of the term.
4.5. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at
---------------------
all meetings of the stockholders and of the Board of Directors.
4.6. THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
---------------------------
the principal executive officer of the Corporation and shall in general
supervise and control all of the business and affairs of the Corporation. He may
sign, with the Secretary or any other officer of the Corporation thereunto
authorized by the Board of Directors, certificates for shares of the
Corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these By-Laws to some other officer or agent of the Corporation,
or shall be required by law to be otherwise signed or executed; and in general
shall perform all duties incident to the office of Chief Executive Officer and
such other duties as may be prescribed by the Board of Directors from time to
time.
7
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THE GSI GROUP, INC. BY-LAWS
4.7. THE PRESIDENT. In the absence of the Chief Executive Officer or in
-------------
the event of his inability or refusal to act, the President shall perform the
duties of the Chief Executive Officer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Chief Executive
Officer. The President may sign, with the Secretary or an Assistant Secretary,
certificates for shares of the Corporation, and shall perform such other duties
as from time to time may be assigned to him by the Chief Executive Officer or by
the Board of Directors.
4.8. THE VICE PRESIDENTS. In the absence of the President or in the event
-------------------
of his inability or refusal to act, the Vice President (or in the event there be
more than one Vice President, the Vice Presidents in the order designated, or in
the absence of any designation, then in the order of their election) shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. Any Vice
President may sign, with the Secretary or an Assistant Secretary, certificates
for shares of the Corporation, and shall perform such other duties as from time
to time may be assigned to him by the Chief Executive Officer, the President or
by the Board of Directors.
4.9. THE TREASURER. If required by the Board of Directors, the Treasurer
-------------
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors shall determine. He shall: (a)
have charge and custody of and be responsible for all funds and securities of
the Corporation, receive and give receipts for moneys due and payable to the
Corporation from any source whatsoever, and deposit all such moneys in the name
of the Corporation in such banks, trust companies or other depositaries as shall
be selected in accordance with the provisions of Article 6 of these By-Laws; (b)
in general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Chief Executive
Officer or by the Board of Directors.
4.10. THE SECRETARY. The Secretary shall: (a) keep the minutes of the
-------------
stockholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these By-Laws or as required by law; (c) be custodian of
the corporate records and of the seal of the Corporation and see that the seal
of the Corporation is affixed to all certificates for shares prior to the issue
thereof and to all documents, the execution of which on behalf of the
Corporation under its seal is duly authorized in accordance with the provisions
of these By-Laws; (d) keep a register of the post office address of each
stockholder which shall be furnished to the Secretary by such stockholder; (e)
sign with the Chief Executive Officer, or the President, certificates for shares
of the Corporation, the issue of which shall have been authorized by resolution
of the Board of Directors; (f) have general charge of the stock transfer books
of the Corporation; and (g) in general perform all duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
by the Chief Executive Officer or by the Board of Directors.
4.11. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant
----------------------------------------------
Treasurers shall respectively, if required by the Board of Directors, give bonds
for the faithful discharge of their duties in such sums and with such sureties
as the Board of Directors shall determine. The Assistant Secretaries as
thereunto authorized by the Board of Directors may sign with the Chief Executive
Officer or the President certificates for shares of the Corporation,
8
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THE GSI GROUP, INC. BY-LAWS
the issue of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers and Assistant Secretaries, in general, shall
perform such duties as shall be assigned to them by the Treasurer or the
Secretary, respectively, or by the Chief Executive Officer or the Board of
Directors.
4.12. SALARIES. The salaries of the officers shall be fixed from time to
--------
time by the Board of Directors and no officer shall be prevented from receiving
such salary by reason of the fact that he is also a director of the Corporation.
In the event that the Internal Revenue Service shall deem any compensation
(including any fringe benefit) paid to an officer to be unreasonable or
excessive, such officer must repay to the Corporation the excess over what is
determined by the Internal Revenue Service to be reasonable compensation, with
interest on such excess at the rate of nine percent (9%) per annum, within 90
days after notice from the Corporation.
ARTICLE
5
INDEMNIFICATION OF OFFICERS AND DIRECTORS
-----------------------------------------
5.1. ACTIONS AGAINST A PERSON. The Corporation shall indemnify any person
------------------------
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgment, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendre or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
5.2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall
---------------------------------------------
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
9
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THE GSI GROUP, INC. BY-LAWS
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
5.3. INDEMNIFICATION IN EVENT OF SUCCESSFUL DEFENSE. To the extent that a
----------------------------------------------
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 5.1 and 5.2 hereof, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
5.4. BOARD OF DIRECTORS' APPROVAL. Any indemnification under Sections 5.1
----------------------------
and 5.2 of these By-Laws (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 5.1 and 5.2 hereof. Such determination shall be made (1) by the Board
of Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable but a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
5.5. ADVANCE INDEMNITY PAYMENTS. Expenses incurred in defending a civil or
--------------------------
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article.
5.6. NON-EXCLUSIVITY. The indemnification and advancement of expenses
---------------
provided by or granted pursuant to, Article NINTH of the Corporation's
Certificate of Incorporation, the Delaware General Corporation Law and this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any By-Law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office.
5.7. INDEMNITY INSURANCE. The Corporation may purchase and maintain
-------------------
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not he is indemnified against such liability under the
provisions of this Article.
5.8. CONSOLIDATION. For the purposes of this Article, references to "the
-------------
Corporation" include, in addition to the resulting corporation, any constituent
corporation
10
<PAGE>
THE GSI GROUP, INC. BY-LAWS
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had the power
and authority to indemnify its directors, officers and employees or agents, so
that any person who is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation or
is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
For the purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE
6
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
6.1. CONTRACTS. The Board of Directors may authorize any officer or
---------
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.
6.2. LOANS. No loans shall be contracted on behalf of the Corporation and
-----
no evidence of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of Directors. Such authority may be general or confined
to specific instances.
6.3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
--------------------
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation, shall be signed by (i) the Chief Executive Officer, or the
Executive Vice President or (ii) such officer or officers, agent or agents of
the Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
11
<PAGE>
THE GSI GROUP, INC. BY-LAWS
6.4. DEPOSITS. All funds of the Corporation not otherwise employed shall
--------
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositaries as the Board of Directors may select.
ARTICLE
7
CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
7.1. CERTIFICATES FOR SHARES. Certificates representing shares of the
-----------------------
Corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the Chief Executive Officer or
the President and by the Secretary or an Assistant Secretary and shall be sealed
with the seal of the Corporation. All certificates for shares shall be
consecutively numbered or otherwise identified. The name of the person to whom
the shares represented thereby are issued, with the number of shares and date of
issue, shall be entered on the books of the Corporation. All certificates
surrendered to the Corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except that in case of a lost,
destroyed or mutilated certificate, a new one may be issued therefor upon such
terms and indemnity to the Corporation as the Board of Directors may prescribe.
7.2. TRANSFER OF SHARES. Transfers of shares of the Corporation shall be
------------------
made only on the books of the Corporation by the holder of record thereof or by
his legal representative, who shall furnish proper evidence of authority to
transfer, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation, and on surrender for
cancellation of the certificate for such shares. The person in whose name shares
stand on the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation.
ARTICLE
8
FISCAL YEAR
-----------
The fiscal year of the Corporation shall begin on the first day of January
in each year and end on the last day of December in each year.
ARTICLE
9
DIVIDENDS
---------
The Board of Directors may from time to time, declare, and the Corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Certificate of Incorporation.
12
<PAGE>
THE GSI GROUP, INC. BY-LAWS
ARTICLE
10
SEAL
----
The Board of Directors may provide a corporate seal which shall be in the
form of a circle and shall have inscribed thereon the name of the Corporation
and the words, "Corporate Seal, Delaware."
ARTICLE
11
WAIVER OF NOTICE
----------------
Whenever any notice whatever is required to be given under the provisions
of these By-Laws or under the provisions of the Certificate of Incorporation or
under the provisions of the Delaware General Corporation law, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice.
ARTICLE
12
AMENDMENTS TO THE BY-LAWS
-------------------------
These By-Laws may be altered, amended or repealed and new By-Laws may be
adopted at any meeting of the Board of Directors of the Corporation by a vote of
all of the directors, subject to the power of the stockholders to alter or
repeal By-Laws made by the Board of Directors.
13
<PAGE>
Exhibit 3.3
RESTATED ARTICLES OF INCORPORATION
OF
DAVID MANUFACTURING CO.
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Section 61 of the Iowa Business Corporation
Act, Chapter 496A, Code of Iowa, the undersigned corporation adopts the
following Restated Articles of Incorporation:
I. The name of the corporation is David Manufacturing Co.
II. The purpose which the corporation is authorized to pursue is, or
includes, the transaction of any or all lawful business for which the
corporation may be incorporated under the Iowa Business Corporation Act.
III. The aggregate number of shares which the corporation has authority to
issue is 100,000 shares of par value of $100.00 each, effective
December 31, 1986.
IV. (A) Pre-emptive and cumulative voting rights are not to be granted.
(B) Provisions for restrictions on transfer of shares may be
contained in the By-Laws or in agreements between shareholders.
V. These Restated Articles of Incorporation: (1) correctly set forth the
provisions of the Articles of Incorporation of the corporation as
heretofore and hereby amended; (2) have been duly adopted as required
by law; and (3) supersede the original Articles of Incorporation of
the corporation and all amendments thereto.
Dated December 30, 1986
DAVID MANUFACTURING CO.
By /s/ David M. Murphy
----------------------------------
David M. Murphy,
Its President
By /s/ Ted Enabnit
----------------------------------
Ted Enabnit
Its Secretary
<PAGE>
Page Two,
STATE OF IOWA )
)SS.
COUNTY OF CERRO GORDO )
We, David M. Murphy and Ted Enabnit, being first duly sworn on oath,
depose and state that we are the President and Secretary, respectively, of David
Manufacturing Co. and that we executed the foregoing Restated Articles of
Incorporation as the President and Secretary of the corporation and that the
statements contained therein are true.
/s/ David M. Murphy
--------------------------------
David M. Murphy
/s/ Ted Enabnit
-------------------------------------
Ted Enabnit
Subscribed and sworn to before me this 30th day of December, A.D., 1986.
[SEAL] /s/ Dorothy Schaefer
-------------------------------------
Dorothy Schaefer, Notary Public
in and for the State of Iowa
<PAGE>
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF
DAVID MANUFACTURING CO.
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to Section 1006 of the Iowa Business Corporation Act, the
undersigned corporation adopts the following Amendment to the corporation's
"Articles of Incorporation.
1. The name of the corporation is David Manufacturing Co.
2. The Articles of Incorporation are amended by deleting Article III which
presently reads:
Article III
The aggregate number of shares which the Corporation shall have
authority to issue is 10,000 shares of par value at $100.00 each.
This Amendment will be implemented by the cancellation of all issued shares
and by issuing to each shareholder a Certificate representing 1/20 of the shares
previously held subject to the provisions that follow. Where the reduction in
number of shares results in a fraction of a share, the Corporation shall pay in
money the value of the fraction of such share.
3. The date of adoption of the Amendment was October 22, 1997.
4. The Amendment was approved by the shareholder. The designation, number
of outstanding shares, number of votes entitled to be cast by each voting group
entitled to vote separately on the Amendment, and the number of votes of each
voting group indisputably represented at the meeting is as follows:
1
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
VOTES ENTITLED VOTES
DESIGNATION OF SHARES TO BE CAST ON REPRESENTED AT
GROUP OUTSTANDING AMENDMENT MEETING
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Common 2,465 2,465 2,454
- -----------------------------------------------------------------------
</TABLE>
5. The total number of votes cast for and against the Amendment by each
voting group entitled to vote separately on the Amendment is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
VOTING GROUP VOTES FOR VOTES AGAINST
- ----------------------------------------------------------
<S> <C> <C>
Common 2,454 NONE CAST
- ----------------------------------------------------------
</TABLE>
6. These Articles are effective at the time of filing with the Secretary
of State.
Dated this 22nd day of October, 1997.
DAVID MANUFACTURING CO.
By: /s/ Wesley J. Cagle
-----------------------------
Wesley J. Cagle, President
2
<PAGE>
Exhibit 3.4
BYLAWS
OF
DAVID MANUFACTURING CO.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. OFFICES................................................. 1
ARTICLE II. SHAREHOLDERS............................................ 1
Section 1. Annual Meeting.......................................... 1
Section 2. Special Meetings........................................ 1
Section 3. Place of Shareholders' Meeting.......................... 2
Section 4. Notice of Meeting....................................... 2
Section 5. Closing of Transfer Books or Fixing of Record Date...... 2
Section 6. Voting Lists............................................ 3
Section 7. Quorum.................................................. 3
Section 8. Proxy................................................... 3
Section 9. Voting of Shares........................................ 3
Section 10. Informal Action by Shareholders......................... 3
Section 11. Voting by Ballot........................................ 4
ARTICLE III. BOARD OF DIRECTORS...................................... 4
Section 1. General Powers.......................................... 4
Section 2. Number, Tenure and Qualifications....................... 4
Section 3. Regular Meetings........................................ 4
Section 4. Special Meetings........................................ 4
Section 5. Notice.................................................. 4
Section 6. Quorum.................................................. 5
Section 7. Voting by Directors..................................... 5
Section 8. Manner of Acting........................................ 5
Section 9. Vacancies............................................... 5
Section 10. Compensation............................................ 5
Section 11. Presumption of Assent................................... 5
Section 12. Informal Action by Directors............................ 6
Section 13. Committees.............................................. 6
ARTICLE IV. OFFICERS................................................ 6
Section 1. Number.................................................. 6
Section 2. Election and Term of Office............................. 6
Section 3. Removal................................................. 6
Section 4. Vacancies............................................... 7
Section 5. President............................................... 7
Section 6. Vice President.......................................... 7
Section 7. Secretary............................................... 7
Section 8. Treasurer............................................... 8
Section 9. Salaries................................................ 8
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS................... 8
Section 1. Contracts............................................... 8
Section 2. Loans................................................... 8
Section 3. Checks, Drafts, etc..................................... 8
Section 4. Deposits................................................ 8
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER.............. 8
Section 1. Certificates for Shares................................. 8
Section 2. Transfer of Shares...................................... 9
ARTICLE VII. FISCAL YEAR............................................. 9
ARTICLE VIII. DISTRIBUTIONS........................................... 9
ARTICLE IX. CORPORATE SEAL.......................................... 9
ARTICLE X. VOTING OF SHARES OWNED BY CORPORATION................... 9
ARTICLE XI. WAIVER OF NOTICE........................................ 10
ARTICLE XII. AMENDMENTS.............................................. 10
ARTICLE XIII. INDEMNIFICATION......................................... 10
Section 1. Mandatory Indemnification............................... 10
Section 2. Further Indemnification................................. 10
ARTICLE XIV. CONSTRUCTION
Section 1. Gender.................................................. 11
</TABLE>
(ii)
<PAGE>
BYLAWS
of
DAVID MANUFACTURING CO.
ARTICLE I. OFFICES
-------
The principal office of the corporation shall be located in the County of
Cerro Gordo, Iowa. The corporation may have such other offices, either within or
without the State of Iowa, as the board of Directors may designate or as the
business of the corporation may require from time to time.
The registered office of the corporation required by the Iowa Business
Corporation Act to be maintained in the State of Iowa may be, but need not be,
identical with the principal office in the State of Iowa, and the address of the
registered office may be changed from time to time by the Board of Directors.
ARTICLE II. SHAREHOLDERS
------------
Section 1. Annual Meeting. The annual meeting of the shareholders shall be held
on the third Saturday of February in each year, beginning with the
year 1992, at the hour of 9:00 a.m., provided the Board of Directors
may fix some other date which is within 30 days before or after said
date and may fix some time other than said above time for such
meeting, for the purpose of electing Directors and for the transaction
of such other business as may come before the meeting. If the day
designated above or fixed by the Board of Directors for the annual
meeting shall be a Sunday or other legal holiday in the state where
held, such meeting shall be held on the next succeeding business day.
If the election of Directors shall not be held on the day designated
herein for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election
to be held at a special meeting of the shareholders as soon thereafter
as conveniently may be.
Section 2. Special Meetings. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be
called by the President or by the Board of Directors, and shall be
called by the President at the request of the holders of not less than
one-tenth of all of the outstanding shares of the corporation entitled
to vote at the meeting.
Section 3. Place of Shareholders' Meeting. The Board of Directors may designate
any place, either within or without the State of Iowa, as the place
of meeting of any annual meeting or
-1-
<PAGE>
for any special meeting called by the Board of Directors. A waiver of
notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Iowa, as
the place for holding of such meeting. If no designation is made, or
if a special meeting be otherwise called, the place of meeting shall
be the registered office of the corporation in the State of Iowa.
Section 4. Notice of Meeting. Written or printed notice stating the
place, day and hour of the meeting and, in case of a special meeting,
the purpose or purposes for which the meeting is called, shall be
delivered not less than 10 nor more than 60 days before the date of
the meeting, either personally or by mail, by or at the direction of
the President, the Secretary, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at
his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of, or to vote
at any special meeting of shareholders or any adjournment thereof, or
shareholders entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose,
the Board of Directors of the corporation may provide that the stock
transfer books shall be closed for a stated period but not to exceed,
in any case, 60 days. If the stock transfer books shall be closed for
the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for at
least 10 days immediately preceding such meeting. In lieu of closing
the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of shareholders,
such date in any case to be not more than 60 days and, in case of a
meeting of shareholders, not less than 10 days prior to the date on
which the particular action, requiring such determination of
shareholders, is to be taken. If the stock transfer books are not
closed and no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record date for
such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been
made as provided in this section, such determination shall apply to
any adjournment thereof.
-2-
<PAGE>
Section 6. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make a complete
list of the shareholders entitled to vote at such meeting, or any
adjournment thereof, arranged in alphabetical order, with the address
of and the number of shares held by each. The list shall be available
for inspection by any shareholder beginning two business days after
notice of the meeting is given. The list shall be kept on file at the
corporation's principal office and shall be subject to inspection by
any shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting. The original stock transfer book
shall be prima facie evidence as to who are the shareholders entitled
to examine such list or transfer books or to vote at any meeting of
shareholders.
Section 7. Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute
a quorum at a meeting of shareholders. If less than a majority of
the outstanding shares are represented at a meeting, a majority of the
shares so represented may adjourn the meeting from time to time
without further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. The
shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
Section 8. Proxy. At all meetings of shareholders, a shareholder may vote by
proxy by executing in writing an appointment form which specifically
identifies the proxy and describes the grant of authority to vote.
Such appointment form shall be filed with the Secretary of the
corporation before or at the time of the meeting. No appointment form
shall be valid after 11 months from the date of its execution unless
otherwise provided in the appointment form.
Section 9. Voting of Shares. Each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting
of shareholders.
Section 10. Informal Action by Shareholders. Any action required to be taken at
a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting or
vote as prescribed in the Iowa Business Corporation Act.
-3-
<PAGE>
Section 11. Voting by Ballot. Voting by shareholders on any question or in any
election may be viva voce unless the presiding officer shall order or
any shareholder shall demand that voting be by ballot.
ARTICLE III. BOARD OF DIRECTORS
------------------
Section 1. General Powers. The business and affairs of the corporation shall be
managed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of Directors of the
corporation shall be seven. Each shall hold office until the next
annual meeting of shareholders and until his successor shall have been
elected and qualified, unless removed at a meeting called expressly
for that purpose by a vote of the holders of a majority of the shares
then entitled to vote at an election of Directors. Only a shareholder
may be a Director.
Section 3. Regular Meetings. A regular meeting of the Board of Directors shall
be held without other notice than this Bylaw immediately after, and at
the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place, either
within or without the State of Iowa, for the holding of additional
regular meetings without other notice than such resolution.
Section 4. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the President or any Director. The
person or persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the State of
Iowa, as the place for holding any special meeting of the Board of
Directors called by them.
Section 5. Notice. Notice of any special meeting shall be given at least two
days prior thereto by written notice delivered personally or mailed to
each Director at his business address, or by telegram. If mailed, such
notice shall be deemed to be delivered when deposited in the United
States mail, so addressed, with postage thereon prepaid. If notice be
given by telegram, such notice shall be deemed to be delivered when
the telegram is delivered to the telegraph company. Any Director may
waive notice of any meeting. The attendance of a Director at a meeting
shall constitute a waiver of notice of such meeting, except where a
Director attends a meeting for the express purpose of objecting to the
transactions of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
-4-
<PAGE>
Section 6. Quorum. A majority of the number of Directors fixed by Section 2 of
this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than
such majority is present at a meeting, a majority of the Directors
present may adjourn the meeting from time to time without further
notice.
Section 7. Voting by Directors. Each Director shall be entitled to one vote
upon each matter submitted to a vote at a meeting of the Board of
Directors.
Section 8. Manner of Acting. The act of the majority of the Directors present
at a meeting at which a quorum is present shall be the act of the
Board of Directors. A Director shall be considered present at a
meeting of the Board of Directors or of a committee designated by the
Board if he participates in such meeting by conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other.
Section 9. Vacancies. Any vacancy occurring in the Board of Directors and any
directorship to be filled by reason of an increase in the number of
Directors may be filled by the affirmative vote of a majority of the
Directors then in office, even if less than a quorum of the Board of
Directors. A Director so elected shall be elected for the unexpired
term of his predecessor in office or the full term of such new
directorship.
Section 10. Compensation. By resolution of the Board of Directors, each
Director may be paid his expenses, if any, of attendance at each
meeting of the Board of Directors, and may be paid a stated salary as
Director or a fixed sum for attendance at each meeting of the Board of
Directors or both. No such payment shall preclude any Director from
serving the corporation in any other capacity and receiving
compensation therefor.
Section 11. Presumption of Assent. A Director of the corporation who is present
at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the
action taken unless his dissent shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action
with the person acting as the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered or
certified mail to the Secretary of the corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply
to a Director who voted in favor of such action.
-5-
<PAGE>
Section 12. Informal Action by Directors. Any action required to be taken at a
meeting of Directors, or any action which may be taken at a meeting of
Directors or of a committee of Directors, may be taken without a
meeting if a consent in writing setting forth the action so taken,
shall be signed by each of the Directors or each of the members of the
committee of Directors, as the case may be.
Section 13. Committees. The Board of Directors from time to time by Resolution
adopted by a majority of the Board of Directors may appoint from its
members a committee or committees, temporary or permanent, and, to the
extent permitted by law and these Bylaws, may designate the duties,
powers and authorities of such committee.
ARTICLE IV. OFFICERS
--------
Section 1. Number. The officers of the corporation shall be a President, a Vice
President, a Secretary and a Treasurer, each of whom shall be elected
by the Board of Directors. The President and Treasurer shall be
members of the Board of Directors. Other officers are not required to
be members of the Board of Directors.
Such other officers and assistant officers as may be deemed necessary
may be elected or appointed by the Board of Directors. Any two or
more offices may be held by the same person.
Further, the Board may by resolution authorize the President to
appoint or designate assistant officers or "vice" officers such as but
not limited to "vice president of manufacturing," "vice president of
sales," etc.
Section 2. Election and Term of Office. The officers of the corporation to be
elected by the Board of Directors shall be elected annually by the
Board of Directors at the first meeting of the Board of Directors held
after each annual meeting of the shareholders. If the election of
officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Each officer shall
hold office until his successor shall have been duly elected and shall
have qualified or until his death or until he shall resign or shall
have been removed in the manner provided in these bylaws.
Section 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interest of the
corporation will be served thereby, but such removal shall be without
prejudice to the contract
-6-
<PAGE>
rights, if any, of the person so removed. Election or appointment of
an officer or agent shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, may be filled by the Board of
Directors for the unexpired portion of the term.
Section 5. President. The President shall be the principal executive officer of
the corporation and, subject to the control of the Board of Directors,
shall in general supervise and control all of the business and affairs
of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors. He may sign, with the
Secretary or any other proper officer of the corporation authorized by
the Board of Directors, certificates for shares of the corporation,
any deeds, mortgages, bonds, contracts, or other instruments which the
Board of Directors has authorized to be executed, except in cases
where the signing and execution thereof shall be expressly delegated
by the Board of Directors or by these Bylaws to some other officer or
agent of the corporation, or shall be required by law to be otherwise
signed or executed; and in general shall perform all duties incident
to the office of President and such other duties as may be prescribed
by the Board of Directors from time to time.
Section 6. Vice President. In the absence of the President or in the event of
his death, inability or refusal to act, the Vice President shall
perform the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the
President. In the event there is more than one Vice President, then
the President shall designate which of the Vice Presidents shall serve
in the President's absence.
Section 7. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one
or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as
required by law; (c) be custodian of the corporate records; (d) keep a
register of the post office address of each shareholder which shall be
furnished to the Secretary by such shareholder; (e) sign with the
President, or Vice President, Certificates for shares of the
corporation, the issuance of which shall have been authorized by
Resolution of the Board of Directors; (f) have general charge of the
Stock Transfer books of the corporation; and (g) in general, perform
all duties incident to the office of secretary and such other duties
as from time to time may be assigned to him by the President or by the
Board of Directors.
-7-
<PAGE>
Section 8. Treasurer. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall
determine. He shall: (a) have charge and custody of and be responsible
for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation
in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article VI of these
bylaws; and (b) in general perform all of the duties incident to the
office of Treasurer and such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 9. Salaries. The salaries of the officers shall be fixed from time to
time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director
of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
Section 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 2. Loans. No loans shall be contracted on behalf of the corporation and
no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in
the name of the corporation, shall be signed by such officer or
officers, agent or agents of the corporation and in such manner as
shall from time to time be determined by resolution of the Board of
Directors.
Section 4. Deposits. All funds of the corporation not otherwise employed shall
be deposited from time to time to the credit of the corporation in
such banks, trust companies or other depositories as the Board of
Directors may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
Section 1. Certificates for Shares. Certificates representing shares of the
corporation shall be in such form as shall be determined by the Board
of Directors. Such Certificates shall be signed by the President and
by the Secretary. The
-8-
<PAGE>
signatures of such officers upon a Certificate may be facsimiles. Each
certificate for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares and
date of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for
transfer shall be cancelled and no new certificate shall be issued
until the former certificate for a like number of shares shall have
been surrendered and cancelled, except that in case of a lost,
destroyed, or mutilated certificate a new one may be issued therefor
upon such terms and indemnity to the corporation as the Board of
Directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the corporation shall be
made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the
secretary of the corporation, and on surrender for cancellation of the
certificate for such shares. The person in whose name shares stand on
the books of the corporation shall be deemed by the corporation to be
the owner thereof for all purposes.
ARTICLE VII. FISCAL YEAR
-----------
The fiscal year of the corporation shall be determined by the Board of
Directors.
ARTICLE VIII. DISTRIBUTIONS
-------------
The Board of Directors may, from time to time, declare and the corporation
may pay dividends on its outstanding shares or may make other distributions to
shareholders in the manner, and upon the terms and conditions provided by law.
ARTICLE IX. CORPORATE SEAL
--------------
The corporation shall not have a corporate seal.
ARTICLE X. VOTING OF SHARES OWNED BY CORPORATION
-------------------------------------
Subject always to the specific directions of the Board of Directors, any
share or shares of stock issued by any other corporation and owned or controlled
by the corporation may be voted at any shareholders' meeting of such other
corporation by the President of the corporation if he be present, or in his
absence by any Vice President of the corporation who may be present. Whenever,
in the judgment of the President, or in his absence, of any Vice President, it
is desirable for the corporation to appoint a proxy or give a
-9-
<PAGE>
shareholders' consent in respect to any share or shares of stock issued by any
other corporation and owned by the corporation, such proxy or consent shall be
executed in the name of the corporation by the President or Vice President of
the corporation and shall be attested by the Secretary or an Assistant Secretary
of the corporation without necessity of any authorization by the Board of
Directors. Any person or persons designated in the manner above stated as the
proxy or proxies of the corporation shall have full right, power and authority
to vote the share or shares of stock issued by such other corporation and owned
by the corporation the same as such share or shares might be voted by the
corporation.
ARTICLE XI. WAIVER OF NOTICE
----------------
Whenever any notice is required to be given to any shareholder or Director
of the corporation under the provisions of these bylaws or under the provisions
of the Articles of Incorporation or under the provisions of the Iowa Business
Corporation Act, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
ARTICLE XII. AMENDMENTS
----------
These bylaws may be altered, amended or repealed and new bylaws may be
adopted by the Board of Directors at any regular or special meeting.
ARTICLE XIII. INDEMNIFICATION
---------------
Section 1. Mandatory Indemnification. The corporation shall indemnify a
Director or an officer who was wholly successful, on the merits or
otherwise in the defense of any proceeding to which the Director or
officer was a party because the Director or officer is or was a
Director or officer of the corporation against reasonable expenses
incurred by the Director or officer in connection with the proceeding.
Section 2. Further Indemnification. Except as provided below, the corporation
will indemnify an individual made a party to a proceeding because the
individual is or was a Director or officer against liability incurred
in the proceeding if all of the following apply:
a) the individual acted in good faith;
b) the individual reasonably believed:
i) in the case of conduct in the individual's official
capacity with the corporation, that the individual's
conduct was in the corporation's best interest.
-10-
<PAGE>
ii) in all other cases, that the individual's conduct was
at least not opposed to the corporation's best
interest.
c) in the case of any criminal proceedings, the individual had
no reasonable cause to believe the individual's conduct was
unlawful.
Indemnification shall be limited to reasonable expenses incurred in
connection with the proceeding. Indemnification shall be in compliance
with the Iowa Business Corporation Act.
ARTICLE XIV. CONSTRUCTION
------------
Words and phrases shall be construed in the masculine, feminine or neuter
gender, according to the context.
Adopted effective the ________ day of _________________, 1991.
------------------------------------
Wesley J. Cagle, President
ATTEST:
- --------------------------------
Linda ___. Brown, Secretary
-11-
<PAGE>
AMENDMENT TO BYLAWS OF DAVID MANUFACTURING COMPANY
Article III of the Bylaws of David Manufacturing Company is amended by the
addition of the following Section:
Section 14. Proxy. At all meetings of the Board, a Director may vote by
proxy by executing in writing an appointment form which
specifically identifies the proxy and describes the grant of
authority to vote. Such appointment form shall be filed with
the Secretary of the Corporation before or at the time of the
Board meeting. No appointment form shall be valid after eleven
months from the date of its execution, unless otherwise
provided in the appointment form.
The Board of Directors of David Manufacturing Co. has adopted the foregoing
Amendment effective the 16th day of May 1993.
/s/ Wesley J. Cagle
---------------------------
Wesley J. Cagle, President
ATTEST:
/s/ Linda L. Brown
- ---------------------------
Linda L. Brown, Secretary
<PAGE>
EXHIBIT 4.1
================================================================================
THE GSI GROUP, INC., as Issuer
and
LASALLE NATIONAL BANK, as Trustee
___________________
INDENTURE
Dated as of November 1, 1997
___________________
$100,000,000
10 1/4% Senior Subordinated Notes due 2007
================================================================================
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of November 1, 1997
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
(S)(S) 310 (a)(1)..................................................... 6.09
(a)(2)..................................................... 6.09
(a)(3)..................................................... N/A
(a)(4)..................................................... N/A
(a)(5)..................................................... 6.09
(b)........................................................ 6.08
(S)(S) 311 (a)........................................................ 6.13
(b)........................................................ 6.13
(S)(S) 312 (a)........................................................ 7.01
(b)........................................................ 7.02
(c)........................................................ 7.02
(S)(S) 313 (a)........................................................ 7.03
(b)........................................................ 7.03
(c)........................................................ 7.03
(d)........................................................ 7.03
(S)(S) 314 (a)(1)..................................................... 7.04
(a)(2)..................................................... 7.04
(a)(3)..................................................... 7.04
(a)(4)..................................................... 10.08
(b)........................................................ N/A
(c)(1)................................................... 1.04, 4.03
(c)(2)................................................... 1.04, 4.03
(c)(3)..................................................... N/A
(d)........................................................ N/A
(e)........................................................ 1.04
(S)(S) 315 (a)........................................................ 6.01(a)
(b)........................................................ 6.02
(c)........................................................ 6.01(b)
(d)........................................................ 6.01(c)
(e)........................................................ 5.14
(S)(S) 316 (a) (last sentence)..............................1.1 ("Outstanding")
-----------
(a)(1)(A).................................................. 5.12
(a)(1)(B).................................................. 5.13
(a)(2)..................................................... N/A
(b)........................................................ 5.08
(S)(S) 317 (a)(1)..................................................... 5.03
(a)(2)..................................................... 5.04
(b)........................................................ 10.03
(S)(S) 318 (a)........................................................ 1.08
</TABLE>
_____________
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of this Indenture. "N/A" means Not Applicable.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions..................................................... 1
-----------
Section 1.02. Other Definitions............................................... 19
-----------------
Section 1.03. Rules of Construction........................................... 20
---------------------
Section 1.04. Form of Documents Delivered to Trustee.......................... 20
--------------------------------------
Section 1.05. Acts of Holders................................................. 22
---------------
Section 1.06. Notices, etc., to the Trustee and the Company................... 22
---------------------------------------------
Section 1.07. Notice to Holders; Waiver....................................... 23
-------------------------
Section 1.08. Conflict with Trust Indenture Act............................... 23
---------------------------------
Section 1.09. Effect of Headings and Table of Contents........................ 24
----------------------------------------
Section 1.10. Successors and Assigns.......................................... 24
----------------------
Section 1.11. Separability Clause............................................. 24
-------------------
Section 1.12. Benefits of Indenture........................................... 24
---------------------
Section 1.13. GOVERNING LAW................................................... 24
-------------
Section 1.14. No Recourse Against Others...................................... 25
--------------------------
Section 1.15. Independence of Covenants....................................... 25
-------------------------
Section 1.16. Exhibits and Schedules.......................................... 25
----------------------
Section 1.17. Counterparts.................................................... 25
------------
Section 1.18. Duplicate Originals............................................. 25
-------------------
Section 1.19. Incorporation by Reference of TIA............................... 25
---------------------------------
ARTICLE TWO
SECURITY FORMS
Section 2.01. Form and Dating................................................. 26
---------------
Section 2.02. Execution and Authentication; Aggregate Principal Amount........ 27
--------------------------------------------------------
Section 2.03. Restrictive Legends............................................. 28
-------------------
Section 2.04. Book-Entry Provisions for Global Notes.......................... 31
--------------------------------------
Section 2.05. Special Transfer Provisions..................................... 32
---------------------------
</TABLE>
___________
Note: This table of contents shall not, for any purposes, be deemed to be a
part of this Indenture.
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE THREE
THE NOTES
Section 3.01. Title and Terms................................................... 34
---------------
Section 3.02. Denominations..................................................... 35
-------------
Section 3.03. Temporary Notes................................................... 35
---------------
Section 3.04. Registration, Registration of Transfer and Exchange............... 35
---------------------------------------------------
Section 3.05. Mutilated, Destroyed, Lost and Stolen Notes....................... 37
-------------------------------------------
Section 3.06. Payment of Interest; Interest Rights Preserved.................... 37
----------------------------------------------
Section 3.07. Persons Deemed Owners............................................. 38
---------------------
Section 3.08. Cancellation...................................................... 39
------------
Section 3.09. Computation of Interest........................................... 39
-----------------------
Section 3.10. Legal Holidays.................................................... 39
--------------
Section 3.11. CUSIP Number...................................................... 39
-------------
Section 3.12. Payment of Additional Interest Under Registration Rights
--------------------------------------------------------
Agreement................................................. 40
---------
ARTICLE FOUR
DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01. Defeasance........................................................ 40
----------
Section 4.02. Covenant Defeasance............................................... 40
-------------------
Section 4.03. Conditions to Defeasance or Covenant Defeasance................... 40
-----------------------------------------------
Section 4.04. Deposited Money and U.S. Government Obligations To
--------------------------------------------------
Be Held in Trust; Etc......................................... 41
---------------------
Section 4.05. Reinstatement..................................................... 42
-------------
Section 4.06. Repayment to Company.............................................. 42
--------------------
ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default................................................. 43
-----------------
Section 5.02. Acceleration of Maturity; Rescission and Annulment................ 44
--------------------------------------------------
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee; Other Remedies....................................... 46
-----------------------
Section 5.04. Trustee May File Proofs of Claims................................. 46
---------------------------------
Section 5.05. Trustee May Enforce Claims Without Possession of Notes............ 47
------------------------------------------------------
Section 5.06. Application of Money Collected.................................... 47
------------------------------
Section 5.07. Limitation on Suits............................................... 48
-------------------
Section 5.08. Unconditional Right of Holders To Receive Principal,
----------------------------------------------------
Premium and Interest.......................................... 48
--------------------
Section 5.09. Restoration of Rights and Remedies................................ 49
----------------------------------
Section 5.10. Rights and Remedies Cumulative.................................... 49
------------------------------
Section 5.11. Delay or Omission Not Waiver...................................... 49
----------------------------
Section 5.12. Control by Majority............................................... 49
-------------------
Section 5.13. Waiver of Past Defaults........................................... 50
-----------------------
Section 5.14. Undertaking for Costs............................................. 50
---------------------
Section 5.15. Waiver of Stay, Extension or Usury Laws........................... 50
---------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE SIX
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities............................. 51
-----------------------------------
Section 6.02. Notice of Defaults.............................................. 52
------------------
Section 6.03. Certain Rights of Trustee....................................... 52
-------------------------
Section 6.04. Trustee Not Responsible for Recitals, Dispositions of Notes
-----------------------------------------------------------
or Application of Proceeds Thereof.......................... 53
----------------------------------
Section 6.05. Trustee and Agents May Hold Notes; Collections; etc............. 54
----------------------------------------------------
Section 6.06. Money Held in Trust............................................. 54
-------------------
Section 6.07. Compensation and Indemnification of Trustee and Its Prior Claim. 54
---------------------------------------------------------------
Section 6.08. Conflicting Interests........................................... 55
---------------------
Section 6.09. Corporate Trustee Required; Eligibility......................... 55
---------------------------------------
Section 6.10. Resignation and Removal; Appointment of Successor Trustee....... 55
---------------------------------------------------------
Section 6.11. Acceptance of Appointment by Successor.......................... 57
--------------------------------------
Section 6.12. Successor Trustee by Merger, etc................................ 57
---------------------------------
Section 6.13. Preferential Collection of Claims Against Issuers............... 58
-------------------------------------------------
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.01. Preservation of Information; Company To Furnish Trustee
-------------------------------------------------------
Names and Addresses of Holders.............................. 58
------------------------------
Section 7.02. Communications of Holders....................................... 58
-------------------------
Section 7.03. Reports by Trustee.............................................. 59
------------------
Section 7.04. Reports by Company.............................................. 59
------------------
ARTICLE EIGHT
SUCCESSOR CORPORATION
Section 8.01. When Company May Merge, etc..................................... 59
----------------------------
Section 8.02. Successor Substituted........................................... 60
---------------------
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. Without Consent of Holders...................................... 61
--------------------------
Section 9.02. With Consent of Holders......................................... 62
-----------------------
Section 9.03. Compliance with Trust Indenture Act............................. 63
-----------------------------------
Section 9.04. Effect of Supplemental Indentures............................... 63
---------------------------------
Section 9.05. Revocation and Effect of Consents............................... 63
---------------------------------
Section 9.06. Notation on or Exchange of Notes................................ 64
--------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 9.07. Trustee May Sign Amendments, etc................................ 64
---------------------------------
ARTICLE TEN
COVENANTS
Section 10.01. Payment of Principal, Premium and Interest...................... 65
------------------------------------------
Section 10.02. Maintenance of Office or Agency................................. 65
-------------------------------
Section 10.03. Money for Note Payments To Be Held in Trust..................... 65
-------------------------------------------
Section 10.04. Existence....................................................... 67
---------
Section 10.05. Payment of Taxes and Other Claims............................... 67
---------------------------------
Section 10.06. Maintenance of Properties....................................... 67
-------------------------
Section 10.07. Insurance....................................................... 68
---------
Section 10.08. Compliance Certificate.......................................... 68
----------------------
Section 10.09. Reporting Requirements.......................................... 68
----------------------
Section 10.10. Limitation on Guarantees by Restricted Subsidiaries............. 69
---------------------------------------------------
Section 10.11. Limitation on Indebtedness...................................... 69
--------------------------
Section 10.12. Limitation on Restricted Payments............................... 72
---------------------------------
Section 10.13. Limitation on Transactions with Affiliates...................... 76
------------------------------------------
Section 10.14. Disposition of Proceeds of Asset Sales.......................... 77
--------------------------------------
Section 10.15. Change of Control............................................... 79
-----------------
Section 10.16. Limitation on Liens............................................. 81
-------------------
Section 10.17. Limitation on Dividends and Other Payment
-----------------------------------------
Restrictions Affecting Restricted Subsidiaries.............. 82
----------------------------------------------
Section 10.18. Restrictions on Preferred Stock of Restricted Subsidiaries...... 82
----------------------------------------------------------
Section 10.19. Limitation on Designations of Unrestricted Subsidiaries......... 82
-------------------------------------------------------
Section 10.20. Limitation on Other Senior Subordinated Indebtedness............ 83
----------------------------------------------------
ARTICLE ELEVEN
REDEMPTION OF NOTES
Section 11.01. Optional and Special Redemption................................. 84
-------------------------------
Section 11.02. Applicability of Article........................................ 84
------------------------
Section 11.03. Election To Redeem; Notice to Trustee........................... 84
-------------------------------------
Section 11.04. Selection of Notes To Be Redeemed............................... 85
---------------------------------
Section 11.05. Notice of Redemption............................................ 85
--------------------
Section 11.06. Deposit of Redemption Price..................................... 86
---------------------------
Section 11.07. Notes Payable on Redemption Date................................ 86
--------------------------------
Section 11.08. Notes Redeemed or Purchased in Part............................. 87
-----------------------------------
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge of Indenture......................... 87
---------------------------------------
Section 12.02. Application of Trust Money...................................... 88
--------------------------
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE THIRTEEN
GUARANTEE OF NOTES
Section 13.01. Guarantee....................................................... 89
---------
Section 13.02. Execution and Delivery of Guarantee............................. 90
-----------------------------------
Section 13.03. Additional Guarantors........................................... 91
---------------------
Section 13.04. Guarantee Obligations Subordinated to
-------------------------------------
Guarantor Senior Indebtedness................................... 91
-----------------------------
Section 13.05. Payment Over of Proceeds upon Dissolution, etc., of a Guarantor. 92
---------------------------------------------------------------
Section 13.06. Suspension of Guarantee Obligations When Guarantor
--------------------------------------------------
Senior Indebtedness in Default.............................. 93
------------------------------
Section 13.07. Release of a Guarantor.......................................... 94
----------------------
Section 13.08. Waiver of Subrogation........................................... 94
---------------------
Section 13.09. Guarantee Subordination Provisions Solely To Define
---------------------------------------------------
Relative Rights............................................. 95
---------------
Section 13.10. Trustee To Effectuate Subordination of Guarantee Obligations.... 96
------------------------------------------------------------
Section 13.11. No Waiver of Guarantee Subordination Provisions................. 96
-----------------------------------------------
Section 13.12. Guarantors To Give Notice to Trustee............................ 97
------------------------------------
Section 13.13. Reliance on Judicial Order or Certificate of Liquidating
--------------------------------------------------------
Agent Regarding Dissolution, etc., of Guarantors............ 98
------------------------------------------------
Section 13.14. Rights of Trustee as a Holder of Guarantor Senior
-------------------------------------------------
Indebtedness; Preservation of Trustee's Rights.............. 98
----------------------------------------------
Section 13.15. Article Thirteen Applicable to Paying Agents.................... 98
--------------------------------------------
Section 13.16. No Suspension of Remedies Subject to Rights of
----------------------------------------------
Holders of Guarantor Senior Indebtedness.................... 98
----------------------------------------
Section 13.17. Trustee's Relation to Guarantor Senior Indebtedness............. 99
---------------------------------------------------
Section 13.18. Subrogation..................................................... 99
-----------
ARTICLE FOURTEEN
SUBORDINATION OF NOTES
Section 14.01. Notes Subordinate to Senior Indebtedness........................ 100
----------------------------------------
Section 14.02. Payment Over of Proceeds upon Dissolution, etc.................. 100
-----------------------------------------------
Section 14.03. Suspension of Payment When Designated Senior
--------------------------------------------
Indebtedness is in Default.................................. 101
--------------------------
Section 14.04. Trustee's Relation to Senior Indebtedness....................... 103
-----------------------------------------
Section 14.05. Subrogation to Rights of Holders of Senior Indebtedness......... 103
-------------------------------------------------------
Section 14.06. Provisions Solely To Define Relative Rights..................... 103
-------------------------------------------
Section 14.07. Trustee To Effectuate Subordination............................. 104
-----------------------------------
Section 14.08. No Waiver of Subordination Provisions........................... 104
-------------------------------------
Section 14.09. Notice to Trustee............................................... 105
-----------------
Section 14.10. Reliance on Judicial Order or Certificate of Liquidating Agent.. 106
--------------------------------------------------------------
Section 14.11. Rights of Trustee as a Holder of Senior Indebtedness;
-----------------------------------------------------
Preservation of Trustee's Rights............................ 106
--------------------------------
Section 14.12. Article Applicable to Paying Agents............................. 106
-----------------------------------
Section 14.13. No Suspension of Remedies....................................... 107
-------------------------
</TABLE>
TESTIMONIUM
-v-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SIGNATURES
Exhibit A -Form of Initial Note..................................................... A-1
Exhibit B -Form of Exchange Note.................................................... B-1
Exhibit C -Form of Certificate To Be Delivered in Connection with Transfers
to Non-QIB Accredited Investors....................................... C-1
Exhibit D -Form of Certificate To be Delivered in Connection with Transfers
Pursuant to Regulation S.............................................. D-1
Exhibit E -Form of Guarantee........................................................ E-1
</TABLE>
-vi-
<PAGE>
INDENTURE, dated as of November 1, 1997, between THE GSI GROUP, INC.,
a corporation incorporated under the laws of the State of Delaware (the
"Company"), as issuer and LASALLE NATIONAL BANK, an Illinois banking
-------
corporation, as trustee (the "Trustee").
-------
RECITALS OF THE COMPANY
The Company has duly authorized the issuance of $100,000,000 aggregate
principal amount of 10 1/4% Senior Subordinated Notes due 2007, (the "Initial
Notes"), and the issuance of 10 1/4% Senior Subordinated Notes due 2007, to be
exchanged for the Initial Notes, including the Exchange Securities and the
Private Exchange Securities contemplated by the Registration Rights Agreement
(as defined herein) (the "Exchange Notes" and, together with the Initial Notes,
the "Notes");
Upon the effectiveness of the Exchange Offer Registration Statement or
the Shelf Registration Statement (each as defined herein), this Indenture will
be subject to, and shall be governed by, the provisions of the Trust Indenture
Act (as defined herein) that are required to be part of and to govern indentures
qualified under the Trust Indenture Act; and
All acts and things necessary have been done to make (i) the Notes,
when duly issued and executed by the Company and authenticated and delivered
hereunder, the valid obligations of the Company and (ii) this Indenture a valid
agreement of the Company in accordance with the terms of this Indenture.
NOW, THEREFOR, THIS INDENTURE WITNESSSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders (as defined herein) thereof, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Holders of the Notes, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness of a Person (i) assumed in
---------------------
connection with an Asset Acquisition from such Person or (ii) existing at the
time such Person becomes a Restricted Subsidiary of any other Person (other than
any Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a Restricted Subsidiary).
"Affiliate" means, with respect to any specified Person (i) any other
---------
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any other Person that
owns, directly or indirectly, 10% or more of any class or series of such
Person's, or the parent of such Person's, capital stock or any officer, director
or affiliate of any such other Person or (iii) with respect to any other natural
Person, any Person having a relationship with such other person by blood,
marriage or adoption not more remote than first cousin. For the purposes of this
definition, "control" when used with respect to any specified Person, means the
power to direct the management and policies of such Person,
<PAGE>
-2-
directly or indirectly, whether through the ownership of Voting Stock, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Affiliate Transaction" has the meaning set forth in Section 10.13.
---------------------
"Asset Acquisition" means (i) an Investment by the Company or any
-----------------
Restricted Subsidiary in any other Person pursuant to which such Person will
become a Restricted Subsidiary or will be merged or consolidated with or into
the Company or any Restricted Subsidiary or (ii) the acquisition by the Company
or any Restricted Subsidiary of the assets of any Person which constitute
substantially all of the assets of such Person, or any division or line of
business of such Person, or which is otherwise outside of the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
----------
transfer, lease or other disposition (including, without limitation, any merger,
consolidation or sale-leaseback transaction) to any Person other than the
Company or a Restricted Subsidiary, in one or a series of related transactions,
of (i) any Capital Stock of any Restricted Subsidiary; (ii) all or substantially
all of the assets of any division or line of business of the Company or any
Restricted Subsidiary; or (iii) any other properties or assets of the Company or
any Restricted Subsidiary other than in the ordinary course of business. For
the purposes of this definition, the term "Asset Sale" will not include (a) any
sale, issuance, conveyance, transfer, lease or other disposition of properties
or assets governed by the provisions of Article Eight; (b) sales of property or
equipment that have become worn out, obsolete or damaged or otherwise unsuitable
for use in connection with the business of the Company or any Restricted
Subsidiary, as the case may be; or (c) any transaction consummated in compliance
with Section 10.12. For purposes of Section 10.14, the term "Asset Sale" shall
not include any sale, conveyance, transfer, lease or other disposition of any
property or asset, whether in one transaction or a series of related
transactions, involving assets with a Fair Market Value not in excess of $1.0
million.
"Asset Sale Offer" has the meaning set forth in Section 10.14.
----------------
"Average Life to Stated Maturity" means, with respect to any
-------------------------------
Indebtedness, as at any date of determination, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years from such date to the
date or dates of each successive scheduled principal payment (including, without
limitation, any sinking fund requirements) of such Indebtedness multiplied by
(b) the amount of each such principal payment by (ii) the sum of all such
principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of
--------------
1978, as amended, or any similar United States Federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors, or any amendment to, succession to or change in any such law.
"Board of Directors" means, with respect to any Person, the board of
------------------
directors, management committee or similar governing body or any authorized
committee thereof responsible for the management of the business and affairs of
such Person.
"Board Resolution" means, with respect to any Person, a copy of a
----------------
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
<PAGE>
-3-
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
------------
Friday which is not a day on which banking institutions in The City of New York,
State of New York, or The City of Chicago, State of Illinois, are authorized or
obligated by law, regulation or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participation, rights in or other equivalents (however designated) of
such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of
----------------------------
(or other agreement conveying the right to use) any property (whether real,
personal or mixed) required to be classified and accounted for as a capital
lease obligation under GAAP, and, for the purpose of the Indenture, the amount
of such obligation at any date shall be the capitalized amount thereof at such
date, determined in accordance with GAAP consistently applied.
"Cash Equivalents" means, at any time, (i) any evidence of
----------------
Indebtedness with a maturity of not more than one year issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of not more than one year of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500,000,000; (iii)
commercial paper with a maturity of not more than one year issued by a
corporation that is not an Affiliate of the Company organized under the laws of
any state of the United States or the District of Columbia and rated at least A-
1 by Standard & Poor's Rating Services, a division of the McGraw Hill Companies,
Inc. or at least P-1 by Moody's Investors Service, Inc.; and (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (i) and (ii) above entered into with any
financial institution meeting the qualifications specified in clause (ii) above.
"Change of Control" means the occurrence of any of the following
-----------------
events: (i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Permitted Holders or their successors
and assigns who are Affiliates of the Permitted Holders, members of their
families and their heirs and executors, is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
will be deemed to have "beneficial ownership" of all securities that such Person
has the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of 50% of the total voting
power of the then outstanding Voting Stock of the Company; (ii) the Company
consolidates with, or merges with or into, another Person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any Person (other than any such transaction where the Holders of
the Voting Stock of the Company immediately prior to such transaction own,
directly or indirectly, not less than a majority of the total voting power of
the then outstanding Voting Stock of the surviving or transferee corporation
immediately after such transaction); or (iii) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of 66 2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
"Change of Control Offer" has the meaning set forth in Section 10.15.
-----------------------
<PAGE>
-4-
"Commission" or "SEC" means the Securities and Exchange Commission,
---------- ---
as from time to time constituted, or if at any time after the execution of this
Indenture such Commission is not existing and performing the applicable duties
now assigned to it, then the body or bodies performing such duties at such time.
"Company" means The GSI Group, Inc., a Delaware corporation, unless
-------
and until a successor replaces it in accordance with this Indenture, and
thereafter means such Surviving Person.
"Company Request" or "Company Order" means a written request or order
--------------- -------------
of the Company signed in the name of the Company by an officer of the Company.
"Consolidated Cash Flow Available for Fixed Charges" means, for any
--------------------------------------------------
period, (i) the sum of, without duplication, the amounts for such period, taken
as a single accounting period, of (a) Consolidated Net Income, (b) to the extent
reducing Consolidated Net Income, Consolidated Non-cash Charges, (c) to the
extent reducing Consolidated Net Income, Consolidated Interest Expense, and (d)
to the extent reducing Consolidated Net Income, Consolidated Income Tax Expense
less (ii) (A) all non-cash items increasing Consolidated Net Income for such
period and (B) all cash payments during such period relating to non-cash charges
that were added back in determining Consolidated Cash Flow Available for Fixed
Charges in any prior period.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of the
----------------------------------------
aggregate amount of Consolidated Cash Flow Available for Fixed Charges of the
Company for the four full fiscal quarters immediately preceding the date of the
transaction (the "Transaction Date") giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio for which consolidated financial
information of the Company is internally available (such four full fiscal
quarter period being referred to herein as the "Four Quarter Period") to the
aggregate amount of Consolidated Fixed Charges of the Company for such Four
Quarter Period. For purposes of this definition, "Consolidated Cash Flow
Available for Fixed Charges" and "Consolidated Fixed Charges" will be
calculated, without duplication, after giving effect on a pro forma basis for
the period of such calculation to (i) the incurrence of any Indebtedness of the
Company or any of the Restricted Subsidiaries during the period commencing on
the first day of the Four Quarter Period to and including the Transaction Date
(the "Reference Period"), including, without limitation, the incurrence of the
Indebtedness giving rise to the need to make such calculation, as if such
incurrence occurred on the first day of the Reference Period, (ii) an adjustment
to eliminate or include, as applicable, the Consolidated Cash Flow Available for
Fixed Charges and Consolidated Fixed Charges of the Company directly
attributable to assets which are the subject of any Asset Sale or Asset
Acquisition (including, without limitation, any Asset Acquisition giving rise to
the need to make such calculation as a result of the Company or one of the
Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness) occurring during the Reference
Period, as if such Asset Sale or Asset Acquisition occurred on the first day of
the Reference Period and (iii) the retirement of Indebtedness during the
Reference Period which cannot thereafter be reborrowed occurring as if retired
on the first day of the Reference Period. Furthermore, in calculating
Consolidated Fixed Charges for purposes of determining the denominator (but not
the numerator) of this definition of "Consolidated Fixed Charge Coverage Ratio,"
(1) interest on Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter will be
deemed to accrue at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date shall be deemed to have been in effect during the
Reference Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by
<PAGE>
-5-
agreements relating to Interest Rate Protection Obligations, will be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements. If the Company or any Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the above definition will
give effect to the incurrence of such guaranteed Indebtedness as if the Company
or any Restricted Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness.
"Consolidated Fixed Charges" means, for any period, the sum of,
--------------------------
without duplication, the amounts for such period of (i) Consolidated Interest
Expense; and (ii) the aggregate amount of cash dividends and other distributions
paid or accrued during such period in respect of Redeemable Capital Stock of the
Company.
"Consolidated Income Tax Expense" means, for any period, the
-------------------------------
provision for federal, state, local and foreign income taxes payable by the
Company and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, plus any Permitted Tax Payments made
during such period.
"Consolidated Interest Expense" means, for any period, without
-----------------------------
duplication, the sum of (a) the interest expense of the Company and the
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (i) any amortization of
debt discount attributable to such period, (ii) the net cost under Interest Rate
Protection Obligations (including any amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and (v) all capitalized interest and all accrued
interest, and (b) all but the principal component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by the Company
and the Restricted Subsidiaries during such period and as determined on a
consolidated basis in accordance with GAAP, minus amortization of deferred
financing costs and expenses.
"Consolidated Net Income" means, for any period, the consolidated
-----------------------
net income (or loss) of the Company and the Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted, to the extent included
in calculating such net income, by excluding, without duplication, (i) all
extraordinary gains or losses (net of fees and expenses relating to the
transaction giving rise thereto), (ii) the portion of net income (or loss) of
the Company and the Restricted Subsidiaries allocable to minority interests in
unconsolidated Persons, except to the extent that cash dividends or
distributions are actually received by the Company or one of the Restricted
Subsidiaries, (iii) net income (or loss) of any Person combined with the Company
or one of the Restricted Subsidiaries in a "pooling of interests" basis
attributable to any period prior to the date of combination, (iv) any gain or
loss, net of taxes, realized upon the termination of any employee pension
benefit plan, (v) gains or losses in respect of any Asset Sales by the Company
or one of the Restricted Subsidiaries (net of fees and expenses relating to the
transaction giving rise thereto), (vi) the net income of any Restricted
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulations applicable to that Restricted Subsidiary or its
stockholders and (vii) any Permitted Tax Payments made during such period.
"Consolidated Non-cash Charges" means, for any period, the aggregate
-----------------------------
depreciation, amortization and other non-cash expenses of the Company and the
Restricted Subsidiaries reducing Consolidated Net Income for such period,
determined on a consolidated basis in accordance with GAAP.
<PAGE>
-6-
"Corporate Trust Office" means the office of the Trustee at which at
----------------------
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 135 S. LaSalle Street, Room 1825; attention: Corporate Trust Administration,
Chicago, Illinois 60603.
"covenant defeasance" has the meaning set forth in Article Four.
-------------------
"Currency Agreement" means any foreign exchange contract, currency
------------------
swap agreement or other similar agreement or arrangement designed to protect the
Company against fluctuations in currency values.
"Currency Agreement Obligations" means the obligations of any person
------------------------------
under a foreign exchange contract, currency swap agreement or other similar
agreement or arrangement to protect such person against fluctuations in currency
values.
"Default" means any event that is, or after notice or passage of time
-------
or both would be, an Event of Default.
"defeasance" has the meaning set forth in Article Four.
----------
"Depositary" means The Depository Trust Company, or such other
----------
depositary as the Company may appoint as a successor thereto.
"Designated Senior Indebtedness" means (a) all Senior Indebtedness
------------------------------
outstanding under the New Credit Agreement and (b) any other Senior Indebtedness
which, at the time of determination, is specifically designated in the
instrument governing such Senior Indebtedness as "Designated Senior
Indebtedness" by the Company.
"Designation" has the meaning set forth in Section 10.19.
-----------
"Designation Amount" has the meaning set forth in Section 10.19.
------------------
"DMC Acquisition" means the acquisition by the Company of David
---------------
Manufacturing Co. as contemplated by the letter of intent dated September 15,
1997.
"Dollars" or "$" means lawful money of the United States of America.
------- -
"Domestic Subsidiary" means a Restricted Subsidiary organized under
-------------------
the laws of the United States, any State or territory thereof or the District of
Columbia.
"Equity Offering" has the meaning set forth in Section 11.01.
---------------
"Event of Default" has the meaning set forth in Section 5.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated by the Commission thereunder.
"Exchange Notes" has the meaning set forth in the preamble hereto.
--------------
<PAGE>
-7-
"Existing Leases" means the Master Equipment Lease Agreement dated as
---------------
of June 7, 1994 by and between Keycorp Leasing Ltd. and the Company and the
Master Equipment Lease Agreement dated December 19, 1996 by and between Fleet
Capital Corporation and the Company.
"Fair Market Value" means, with respect to any asset, the price which
-----------------
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under pressure
or compulsion to complete the transaction. Fair Market Value shall be determined
by the Board of Directors of the Company acting in good faith evidenced by a
board resolution thereof delivered to the Trustee.
"Four Quarter Period" has the meaning set forth in the definition of
-------------------
"Consolidated Fixed Charge Coverage Ratio."
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the Issue Date and
are consistently applied.
"guarantee" means, as applied to any obligation, (i) a guarantee
---------
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantor" means each Domestic Subsidiary, if any, formed, created or
---------
acquired before or after the Issue Date, required to become a Guarantor after
the Issue Date pursuant to Section 10.10.
"Guarantor Senior Indebtedness" means, with respect to the
-----------------------------
Indebtedness of any Guarantor, any such Indebtedness represented by a guarantee
by such Guarantor of any Senior Indebtedness.
"Holder" or "Noteholder" means a Person in whose name a Note is
------ ----------
registered in the Note Register.
"incur" has the meaning set forth in Section 10.11 and "incurrence,"
-----
"incurred" and "incurring" shall have the meanings correlative to the foregoing.
"Indebtedness" means, with respect to any Person, without duplication,
------------
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payable and other
accrued current liabilities incurred in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of such
Person in connection with any letters of credit, bankers acceptance or other
similar credit transaction and in connection with any agreement to purchase,
redeem, exchange, convert or otherwise acquire for value any Capital Stock of
such Person, or any warrants, rights or options to acquire such Capital Stock,
now or hereafter outstanding (provided, that any future payment obligations of
the Company issued by the Company in accordance with the Stockholder Agreements
shall not be "Indebtedness" hereunder, if such obligations are expressly
subordinated to the Notes; and provided, further, that no cash payments may be
made by the Company in respect of such future payment
<PAGE>
-8-
obligations to the extent such payments do not violate the limitations set forth
in Section 10.12), (ii) all obligations of such Person evidenced by bonds,
notes, debentures or other similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (iv) all Capitalized Lease
Obligations of such Person, (v) all Indebtedness referred to in the preceding
clauses of other Persons and all dividends of other Persons, the payment of
which is secured by (or for which the Holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured), (vi) all guarantees of Indebtedness by such Person,
provided, however, that any such guarantee shall not be deemed Indebtedness
unless the Company shall have received a demand for payment thereunder and the
Company shall have failed to make such payment within ten business days of the
date required for payment, (vii) all Redeemable Capital Stock valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends, (viii) all obligations under or in respect of
Currency Agreements and Interest Rate Protection Obligations of such Person, and
(ix) any amendment, supplement, modification, deferral, renewal, extension or
refunding of any liability of the types referred to in clauses (i) through
(viii) above. For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price will be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
will be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value is to be determined in good faith by the Board of
Directors of the issuer of such Redeemable Capital Stock.
"Indenture" means this instrument as originally executed (including
---------
all exhibits and schedules hereto) and as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof.
"Independent Financial Advisor" means an accounting, appraisal or
-----------------------------
investment banking firm (i) which does not, and whose directors, officers and
employees or Affiliates do not have, a direct or indirect financial interest in
the Company and (ii) which, in the judgment of the Board of Directors of the
Company, is otherwise independent and qualified to perform the task for which it
is to be engaged.
"Initial Purchasers" means Merrill Lynch, Pierce, Fenner & Smith
------------------
Incorporated and Morgan Stanley & Co. Incorporated.
"Insolvency or Liquidation Proceeding" means, with respect to any
------------------------------------
Person, any liquidation, dissolution or winding up of such Person, or any
bankruptcy, reorganization, insolvency, receivership or similar proceeding with
respect to such Person, whether voluntary or involuntary.
"Institutional Accredited Investor" means an institution that is an
---------------------------------
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" means, when used with respect to any Note,
---------------------
the Stated Maturity of an installment of interest on such Note, as set forth in
such Note.
<PAGE>
-9-
"Interest Rate Protection Obligations" means the obligations of any
------------------------------------
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount or any other arrangement involving payments by or to such Person
based upon fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
----------
advance, loan or other extension of credit (including by means of a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others or otherwise), or any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by any other Person. Investments shall exclude extensions
of trade credit on commercially reasonable terms in accordance with the
Company's normal trade practices. In addition to the foregoing, any foreign
exchange contract, currency swap, Interest Rate Protection Obligation or similar
agreement shall constitute an Investment.
"Issue Date" means the original issue date of the Notes under this
----------
Indenture.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
----
privilege, security interest, hypothecation, cessation and transfer, lease of
real property, assignment for security, claim, deposit arrangement, or
preference or priority or other encumbrance upon or with respect to any property
of any kind, whether real, Personal or mixed, movable or immovable, now owned or
hereafter acquired. A Person will be deemed to own subject to a Lien any
property it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Material Subsidiary" means any Restricted Subsidiary of the Company
-------------------
that is a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X
under the Securities Act (as such regulation is in effect on the Issue Date).
"Net Cash Proceeds" means, with respect to any Asset Sale, the
-----------------
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) net of (i)
brokerage commissions and other reasonable fees and expenses (including fees and
expenses of legal counsel and investment bankers) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale, (iii)
amounts required to be paid to any Person (other than the Company or any
Restricted Subsidiary) owning a beneficial interest in or having a Lien on the
assets subject to the Asset Sale and (iv) appropriate amounts to be provided by
the Company or any Restricted Subsidiary, as the case may be, as a reserve
required in accordance with GAAP consistently applied against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"New Credit Agreement" means the Credit Agreement between the Company
--------------------
and LaSalle National Bank, as in effect on the Issue Date, and as such agreement
may be amended, renewed, extended, substituted, refinanced, replaced,
supplemented or otherwise modified from time to time, and includes (a) related
notes, guarantees and other agreements executed in connection therewith and (b)
any agreement (i) extending the maturity of all or any portion of the
Indebtedness thereunder, (ii) adding additional borrowers or
<PAGE>
-10-
guarantors thereunder and (iii) increasing the amount to be borrowed thereunder;
provided, however, that in the case of clauses (i), (ii) and (iii), any such
agreement is not prohibited by this Indenture.
"Non-payment Default" means, for purposes of Article Fourteen hereof,
-------------------
any default (other than a Payment Default) with respect to any Designated Senior
Indebtedness of the Company or any Guarantor pursuant to which the maturity
thereof may be accelerated.
"Non-U.S. Person" means a person who is not a U.S. person, as
---------------
defined in Regulation S.
"Note Guarantee" means a guarantee by a Guarantor, if any, of the
--------------
Notes and the Company's obligations under this Indenture.
"Notes" has the meaning set forth in the preamble hereto.
-----
"Obligations" means any principal, interest, penalties, fees,
-----------
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offering"" shall have the meaning set forth in the Offering
--------
Memorandum.
"Offering Memorandum" means the offering memorandum dated as of
-------------------
October 30, 1997 relating to the Offering and sale of the Notes.
"Officer" means, with respect to any Person, the Chairman, President,
-------
Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, any
Vice President, Treasurer or Secretary, or any other officer designated by the
Board of Directors serving in a similar capacity.
"Officers' Certificate" means a certificate signed by two Officers
---------------------
or by an Officer and an Assistant Treasurer or Assistant Secretary of the
Company or a Guarantor, as the case may be.
"Opinion of Counsel" means a written opinion of counsel, who may be an
------------------
employee of or counsel to the Company, and who shall be reasonably acceptable to
the Trustee.
"Outstanding" means, as of the date of determination, all Notes
-----------
theretofor authenticated and delivered under this Indenture, except:
(i) Notes theretofor cancelled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofor deposited with the
Trustee or any Paying Agent (other than the Company or any Affiliate
thereof) in trust for the Holders of such Notes; provided, however, that if
such Notes are to be redeemed, notice of such redemption has been duly and
irrevocably given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Notes with respect to which the Company has effected defeasance
or covenant defeasance as provided in Article Four, to the extent provided
in Sections 4.02 and 4.03; and
<PAGE>
-11-
(iv) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture, other than any such
Notes in respect of which there shall have been presented to the Trustee
proof satisfactory to it that such Notes are held by a bona fide purchaser
in whose hands the Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor under the Notes or any Affiliate of the Company
or such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Notes which the Trustee knows to be so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Company or any other obligor under the Notes or any Affiliate
of the Company or such other obligor.
"Pari Passu Indebtedness" means any Indebtedness of the Company or any
-----------------------
Guarantor ranking pari passu in right of payment with the Notes or the Note
Guarantee of such Guarantor, as applicable.
"Paying Agent" means any Person authorized by the Company to pay the
------------
principal, premium, if any, or interest on any Notes on behalf of the Company.
"Payment Blockage Period" shall have the meaning set forth in Section
-----------------------
14.03.
"Payment Default" means any default in the payment when due (whether
---------------
at Stated Maturity, by acceleration or otherwise) of principal or interest on,
or of unreimbursed amounts under drawn letters of credit or fees relating to
letters of credit constituting, any Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, of the Company or any Guarantor.
"Permitted Holders" means Craig Sloan, Jorge Andrade, John W. Funk and
-----------------
Howard G. Buffett or their successors and assigns who are Affiliates of the
Permitted Holders, members of their families and their heirs or executors.
"Permitted Indebtedness" has the meaning set forth in Section 10.11.
----------------------
"Permitted Investments" means (a) Cash Equivalents; (b) Investments in
---------------------
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (c) loans and
advances to employees made in the ordinary course of business not to exceed
$250,000 in the aggregate at any one time outstanding; (d) Interest Rate
Protection Obligations and Currency Agreements; and (e) Investments not to
exceed $15.0 million in the aggregate outstanding at any time.
"Permitted Tax Payments" has the meaning set forth in Section 10.12.
----------------------
"Person" means any individual, corporation, limited liability company,
------
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any Person, Capital Stock of
---------------
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribu-
<PAGE>
-12-
tion of assets upon any voluntary or involuntary liquidation or dissolution of
such Person, over Capital Stock of any other class of such Person.
"Private Placement Legend" means the legend initially set forth on the
------------------------
Initial Notes in the form set forth in Section 2.03.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
---------------------------
Restricted Subsidiary incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property,
plant or equipment, provided that the aggregate principal amount of such
Indebtedness does not exceed the lesser of the Fair Market Value of such
property or such purchase price or cost.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
----------------------------- ---
specified in Rule 144A under the Securities Act.
"Redeemable Capital Stock" means any class or series of Capital Stock
------------------------
to the extent that, either by its terms, by the terms of any security into which
it is convertible or exchangeable, or by contract or otherwise, is or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Notes or is redeemable at the option of the
Holder thereof at any time prior to such Stated Maturity, or is convertible into
or exchangeable for debt securities at any time prior to such Stated Maturity,
provided the Capital Stock subject to the Stockholder Agreements shall not be
deemed Redeemable Capital Stock.
"Redemption Date" means, with respect to any Note to be redeemed, any
---------------
date fixed for such redemption by or pursuant to this Indenture and the terms of
the Notes.
"Redemption Price" means, with respect to any Note to be redeemed,
----------------
the price at which it is to be redeemed pursuant to this Indenture and the terms
of the Notes.
"Reference Period" has the meaning set forth under the definition of
----------------
"Consolidated Fixed Charge Coverage Ratio."
"Refinance" means, with respect to any Indebtedness, any refinancing,
---------
redemption, retirement, renewal, substitution, replacement, extension or
refunding of such Indebtedness.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated on or about the Issue Date between the Company and the Initial
Purchasers for the benefit of themselves and the Holders as the same may be
amended from time to time in accordance with the terms thereof.
"Regular Record Date" means the Regular Record Date specified in the
-------------------
Notes.
"Regulation S" means Regulation S under the Securities Act.
------------
"Responsible Officer" means, with respect to the Trustee, the
-------------------
chairman or vice chairman of the board of directors, the chairman or vice
chairman of the executive committee of the board of directors, the president,
any vice president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller and any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any
<PAGE>
-13-
of the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer of the Trustee to whom any corporate
trust matter is referred because of his or her knowledge of and familiarity with
the particular subject.
"Restricted Payment" has the meaning set forth in Section 10.12.
------------------
"Restricted Security" has the meaning assigned to such term in Rule
-------------------
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to receive, at its request, and conclusively rely on an Opinion of
Counsel with respect to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that has
---------------------
not been designated by the Board of Directors of the Company, by a board
resolution delivered to the Trustee, as an Unrestricted Subsidiary pursuant to
and in compliance with Section 10.19. Any such designation may be revoked by a
board resolution of the Board of Directors of the Company delivered to the
Trustee, subject to the provisions of Section 10.19.
"Revocation" has the meaning set forth in Section 10.19.
----------
"Rule 144A" means Rule 144A under the Securities Act.
---------
"Securities Act" means the Securities Act of 1933, as amended, and
--------------
the rules and regulations promulgated by the Commission thereunder.
"Senior Indebtedness" means the principal of, premium, if any, and
-------------------
interest on any Indebtedness of the Company, whether outstanding on the Issue
Date or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to any Indebtedness of the
Company. Without limiting the generality of the foregoing, "Senior Indebtedness"
will include (a) the principal of, premium, if any, and interest (including
interest that would accrue but for the filing of a petition initiating any
proceeding under any state or federal bankruptcy laws, whether or not such claim
is allowable in such proceeding) on all obligations of every nature of the
Company from time to time owed to the lenders under the New Credit Agreement,
including, without limitation, principal of and interest on, and all fees and
expenses payable under the New Credit Agreement and (b) amounts owing under the
Existing Leases. Notwithstanding the foregoing, "Senior Indebtedness" shall not
include, to the extent constituting Indebtedness, (i) Indebtedness evidenced by
the Notes, (ii) Indebtedness that is subordinate or junior in right of payment
to any Indebtedness of the Company, (iii) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code, is without recourse to the Company, (iv) Indebtedness which is represented
by Redeemable Capital Stock, (v) Indebtedness for goods, materials or services
purchased in the ordinary course of business or Indebtedness consisting of trade
payables or other current liabilities (other than any current liabilities owing
under the New Credit Agreement or the current portion of any long-term
Indebtedness which would constitute Senior Indebtedness but for the operation of
this clause (v)), (vi) Indebtedness of or amounts owed by the Company for
compensation to employees or for services rendered to the Company, (vii) any
liability for federal, state, local or other taxes owed or owing by the Company,
(viii) Indebtedness of the Company to a Subsidiary of the Company, (ix) that
portion of any Indebtedness which at the time of issuance is issued in violation
of this Indenture and (x) any obligation to purchase Capital Stock under the
Stock Purchase Agreements.
<PAGE>
-14-
"Senior Representative" means the representative or representatives
---------------------
designated in writing to the Trustee of the holders of any class or issue of
Designated Senior Indebtedness; provided that, in the absence of a
representative of the type described above, any holder or holders of a majority
of the principal amount outstanding of any class or issue of Designated Senior
Indebtedness may collectively act as Senior Representative for such class or
issue.
"Stated Maturity" means, with respect to any Note or any installment
---------------
of interest thereon, the dates specified in such Note as the fixed date on which
the principal of such Note or such installment of interest is due and payable,
and when used with respect to any other Indebtedness, means the date specified
in the instrument governing such Indebtedness as the fixed date on which the
principal of such Indebtedness or any installment of interest is due and
payable.
"Stockholder Agreements" means each of the Stock Restriction and Buy-
----------------------
Sell Agreements, made as of June 6, 1996 by and between each of the Permitted
Holders and the Company with respect to the Company's voting Capital Stock, as
amended, and the Stock Restriction and Buy-Sell Agreement made as of January 1,
1997 among the Company, the Permitted Holders and other persons named therein
with respect to the Company's non-voting Capital Stock, as amended.
"Subordinated Indebtedness" means, with respect to the Company,
-------------------------
Indebtedness of the Company which is expressly subordinated in right of payment
to the Notes or, with respect to any Guarantor, Indebtedness of such Guarantor
which is expressly subordinated in right of payment to the Note Guarantee of
such Guarantor.
"Subsidiary" means, with respect to any Person, (a) any corporation
----------
of which the outstanding shares of Voting Stock having at least a majority of
the votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (b) any other Person of which
at least a majority of the shares of Voting Stock are at the time, directly or
indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in any
----------------
consolidation or merger, or any sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of its properties and assets as an
entirety, the Person formed by or surviving such merger or consolidation or the
Person to which such sale, assignment, conveyance, transfer or lease is made.
"Tax Amount" means, with respect to any period, without duplication,
----------
the amount of taxable income of any Person attributable to the income of the
Company and its Restricted Subsidiaries for such period multiplied by the
highest marginal combined federal, state and local tax rates applicable to
individuals during such period.
"Transaction Date" has the meaning set forth under the definition of
----------------
"Consolidated Fixed Charge Coverage Ratio".
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
------------------- ---
as amended, and as in effect from time to time.
"Trustee" means the Person named as the "Trustee" in the first
-------
paragraph of this Indenture, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
<PAGE>
-15-
"Unrestricted Subsidiary" means a Subsidiary of the Company (other
-----------------------
than a Guarantor) designated as such pursuant to and in compliance with Section
10.19. Any such designation may be revoked by a Board Resolution of the Company
delivered to the Trustee, subject to the provisions of Section 10.19.
"U.S. Government Obligations" means securities that are (i) direct
---------------------------
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a Depositary receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
Holder of such Depositary receipt; provided, however, that (except as required
-------- -------
by law) such custodian is not authorized to make any deduction from the amount
payable to the Holder of such Depositary receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by such
Depositary receipt.
"Unutilized Net Cash Proceeds" has the meaning set forth in Section
----------------------------
10.14.
"Voting Stock" means any class or classes of Capital Stock pursuant
------------
to which the Holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the Board of Directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, with (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
----------------------------------
of which 100% of the outstanding Capital Stock is owned by the Company and/or
another Wholly-Owned Restricted Subsidiary. For purposes of this definition, any
directors' qualifying shares shall be disregarded in determining the ownership
of a Restricted Subsidiary.
Section 1.02. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Act" 1.05
"Agent Members" 2.04
"Asset Sale Offer Price" 10.14
"Asset Sale Offer Trigger Date" 10.14
"Authenticating Agent" 2.02
"Change of Control Date" 10.15
"Change of Control Offer" 10.15
</TABLE>
<PAGE>
-16-
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Change of Control Purchase Date" 10.15
"Change of Control Purchase Price" 10.15
"covenant defeasance" 4.03
"Defaulted Interest" 3.06
"Defeased Guarantees" 4.01
"Defeased Notes" 4.01
"Existing Indebtedness" 10.11
"Global Notes" 2.01
"Initial Notes" Recitals
"Note Register" 3.04
"Note Registrar" 3.04
"Notice of Default" 5.01
"Offshore Global Note" 2.01
"Offshore Physical Note" 2.01
"Optional Redemption Price" 11.01
"Other Obligations" 1.20
"Payment Blockage Notice" 14.03
"Physical Notes" 2.01
"Refinancing Indebtedness" 10.11
"Repurchase Payments" 10.12
"Required Filing Dates" 10.09
"U.S. Global Note" 2.01
"U.S. Physical Notes" 2.01
</TABLE>
Section 1.03. Rules of Construction.
---------------------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
<PAGE>
-17-
(d) the words "herein," "hereof" and "hereunder" and other words of
------ ------ ---------
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(e) all references to "$"" or "dollars" shall refer to the lawful
- -------
currency of the United States of America;
(f) the words "include," "included" and "including" as used herein
------- -------- ---------
shall be deemed in each case to be followed by the phrase "without
-------
limitation";
----------
(g) words in the singular include the plural, and words in the plural
include the singular; and
(h) any reference to a Section or Article refers to such Section or
Article of this Indenture unless otherwise indicated.
Section 1.04. Form of Documents Delivered to Trustee.
--------------------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee (a) an
Officers' Certificate in form and substance reasonably satisfactory to the
Trustee stating that, in the opinion of the signers, all conditions precedent
(including any covenants compliance with which constitutes a condition
precedent), if any, provided for in this Indenture relating to the proposed
action have been complied with, (b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee stating that, in the opinion of counsel,
all such conditions (including any covenants compliance with which constitutes a
condition precedent), have been complied with and (c) where applicable, a
certificate or opinion by an accountant that complies with Section 314(c) of the
Trust Indenture Act.
Each Officers' Certificate and Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this Indenture shall
include:
(a) a statement that the Person making such certificate or Opinion of
Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements contained in such Officers'
Certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
<PAGE>
-18-
Any certificate or opinion of an Officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous. Opinions of Counsel required to be delivered to the
Trustee may have qualifications customary for opinions of the type required and
counsel delivering such Opinions of Counsel may rely on certificates of the
Company or government of other officials customary for opinions of the type
required, including certificates certifying as to matters of fact, including
that various financial covenants have been complied with.
Any certificate of opinion of an officer of the Company, and Guarantor
of other obligor on the Notes may be based, insofar as it relates to accounting
matters, upon a certificate or opinion of, or representations by, an accountant
or firm of accountants in the employ of the Company, unless such officer knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to accounting matters upon which his
certificate or opinion may be based are erroneous. Any certificate or opinion
of any independent firm of public accountants filed with the Trustee shall
contain a statement that such firm is independent with respect to the Company.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated, with
proper identification of each matter covered therein, and form one instrument.
Section 1.05. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in Person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
---
such instrument or instruments. Proof of execution (as provided below in
subsection (b) of this Section 1.05) of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01 hereof) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient including, without limitation, by verification from a notary
public or signature guarantee.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Note shall bind every future Holder
of the same Note or the Holder of every Note issued upon the transfer thereof or
in exchange therefor or in lieu thereof to the same extent as the original
Holder, in
<PAGE>
-19-
respect of anything done, suffered or omitted to be done by the Trustee, any
Paying Agent or the Company in reliance thereon, whether or not notation of such
action is made upon such Note.
Section 1.06. Notices, etc., to the Trustee and the Company.
---------------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed, in writing,
to or with the Trustee at its Corporate Trust Office or at any other
address previously furnished in writing to the Holders and the Company by
the Trustee or at the office of any drop agent specified by or on behalf of
the Trustee to the Holders and the Company from time to time; and
(b) the Company by the Trustee or by any Holder shall be sufficient
for every purpose (except as otherwise expressly provided herein)
hereunder if in writing and mailed, first-class postage prepaid, to the
Company, addressed to it at 1004 East Illinois Street, Assumption,
Illinois 62510, Attention: John W. Funk, with a copy to Mayer, Brown &
Platt, 190 South LaSalle Street, Chicago, Illinois 60610, Attention: Paul
Theiss, or at any other address previously furnished in writing to the
Trustee by the Company.
Section 1.07. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise expressly provided herein)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Note Register,
not later than the latest date, and not earlier than the earliest date,
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Any notice when mailed to a Holder in the
aforesaid manner shall be conclusively deemed to have been received by such
Holder whether or not actually received by such Holder. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any event
as required by any provision of this Indenture, then any method of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Section 1.08. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such provision or requirement of the Trust Indenture Act shall
control.
<PAGE>
-20-
If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, such provision
of the Trust Indenture Act shall be deemed to apply to this Indenture as so
modified or excluded, as the case may be, if this Indenture shall then be
qualified under the TIA.
Section 1.09. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.10. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company and
Trustee shall bind their respective successors and assigns, whether so expressed
or not.
Section 1.11. Separability Clause.
-------------------
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.12. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Notes issued pursuant hereto,
express or implied, shall give to any Person (other than the parties hereto and
their successors hereunder, any Paying Agent and the Holders) any benefit or any
legal or equitable right, remedy or claim under this Indenture, except as
provided in Article Thirteen and Article Fourteen.
SECTION 1.13. GOVERNING LAW.
-------------
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). THE TRUSTEE, THE COMPANY,
EACH GUARANTOR AND ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND THE HOLDERS
AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL
OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE
NOTES.
Section 1.14. No Recourse Against Others.
--------------------------
No director, officer, employee or stockholder of the Company or any
Guarantor, as such, shall have any liability for any obligations of the Company
or any Guarantor under the Notes, the Guarantees or this Indenture. Each Holder
of Notes by accepting a Note waives and releases all such liability, and such
waiver and release is part of the consideration for the issuance of the Notes.
<PAGE>
-21-
Section 1.15. Independence of Covenants.
-------------------------
All covenants and agreements in this Indenture shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default if such action is taken or condition exists.
Section 1.16. Exhibits and Schedules.
----------------------
All exhibits and schedules attached hereto are by this reference made
a part hereof with the same effect as if herein set forth in full.
Section 1.17. Counterparts.
------------
This Indenture may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument.
Section 1.18. Duplicate Originals.
-------------------
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 1.19. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in, and made a part of, this Indenture.
Any terms incorporated by reference in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
under the TIA have the meanings so assigned to them therein.
ARTICLE TWO
SECURITY FORMS
Section 2.01. Form and Dating.
---------------
The Initial Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A hereto. The
---------
Exchange Notes and the Trustee's certificate of authentication relating thereto
shall be substantially in the form of Exhibit B hereto. The Notes may have
---------
notations, legends or endorsements required by law, stock exchange rule or
Depositary rule or usage. The Company shall approve the form of the Notes and
any notation, legend or endorsement on them. Each Note shall be dated the date
of its authentication and shall show the date of its authentication.
The additional terms and provisions contained in the forms of Notes
and Guarantees, annexed hereto as Exhibits A and E, respectively, shall
----------------
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
<PAGE>
-22-
Notes will initially be issued in either of the following forms:
(a) Notes offered and sold in reliance on Rule 144A issued initially
in the form of one or more global Notes in registered form, substantially
in the form set forth in Exhibit A (the "U.S. Global Note"), deposited with
---------
the Trustee, as custodian for the Depositary, duly executed by the Company
and authenticated by the Trustee as hereinafter provided and shall bear the
legend set forth in Section 2.03 hereof. The aggregate principal amount of
the U.S. Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the
Depositary.
(b) Notes offered and sold in offshore transactions in reliance on
Regulation S represented upon issuance by a temporary global Note (the
"Offshore Global Note" and, together with the U.S. Global Note, the "Global
Notes"), which will be exchangeable for certificated Notes in registered
form in substantially the form set forth in Exhibit A (the "Offshore
---------
Physical Notes") only upon the expiration of the "40-day restricted period"
within the meaning of Rule 903(c)(3) of Regulation S.
Subsequent to the initial issuance of the Global Notes provided for in
paragraphs (a) and (b) above, physical certificates for notes transferred in
reliance on any exemption from registration under the Securities Act, other than
as described in the preceding two paragraphs, shall be issued in substantially
the form set forth in Exhibit A, subject to the Company's and the Trustee's
---------
right prior to any such transfer to require the delivery of an Opinion of
Counsel, certifications and/or other information satisfactory to each of them
(the "U.S. Physical Notes"). The Offshore Physical Notes and the U.S. Physical
Notes are sometimes collectively herein referred to as the "Physical Notes."
Physical Notes may initially be registered in the name of the Depositary or a
nominee of such Depositary and be delivered to the Trustee as custodian for such
Depositary. Beneficial owners of Physical Notes, however, may request
registration of such Physical Notes in their names or the names of their
nominees.
Section 2.02. Execution and Authentication; Aggregate Principal
-------------------------------------------------
Amount.
- ------
The Notes shall be executed on behalf of the Company by two Officers
of the Company. The signature of any Officer on the Notes may be manual or
facsimile.
If an Officer or Assistant Secretary whose manual or facsimile
signature is on a Note was an Officer or Assistant Secretary at the time of such
execution but no longer holds that office or position at the time the Trustee
authenticates the Note, the Note shall nevertheless be valid.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed $100,000,000 and (ii) Exchange
Notes from time to time for issue only in exchange for a like principal amount
of Initial Notes, in each case upon a written order of the Company in the form
of an Officers' Certificate. The Officers' Certificate shall specify the amount
of Notes to be authenticated and the date on which the Notes are to be
authenticated, whether the Notes are to be Initial Notes or Exchange Notes and
whether the Notes are to be issued as Physical Notes or Global Notes or such
other information as the
<PAGE>
-23-
Trustee may reasonably request. The aggregate principal amount of Notes
outstanding at any time may not exceed $100,000,000, except as provided in
Section 3.05 hereof.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an agent to deal with the
Company or with any Affiliate of the Company.
Section 2.03. Restrictive Legends.
-------------------
Each Global Note and Physical Note that constitutes a Restricted
Security shall bear the following legend (the "Private Placement Legend") on the
------------------------
face thereof until the third anniversary of the Issue Date, unless otherwise
agreed by the Company and the Holder thereof:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE
WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED
BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR
PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND
(Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE IN RULE 144A, (D) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (A)(1),(2),(3) OR (7) OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (E) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUT-
<PAGE>
-24-
SIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER
THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE
COMPANY, THE TRUSTEE AND THE TRANSFER AGENT AND REGISTRAR
PRESERVE THE RIGHT PRIOR TO ANY OFFER, SALE OR OTHER TRANSFER
PURSUANT TO CLAUSES (D),(E) OR (F) ABOVE TO REQUIRE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATIONS AND OTHER INFORMATION
SATISFACTORY TO THE COMPANY, THE TRUSTEE AND THE TRANSFER AGENT
AND REGISTRAR. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear a legend on the face thereof in
substantially the following form:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF
THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE DEPOSITARY, OR BY
THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION
2.05 OF THE INDENTURE.
Section 2.04. Book-Entry Provisions for Global Notes.
--------------------------------------
This Section 2.04 shall apply only to the Global Notes deposited with
the Depositary or its custodian.
<PAGE>
-25-
(1) So long as the Notes are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, the Global Notes initially
shall (i) be registered in the name of the Depositary or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 2.03.
Members of, or participants in, the Depositary ("Agent Members") shall
-------------
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Notes, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global
Notes for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any Agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(2) Transfers of the Global Notes shall be limited to transfers in
whole, but, subject to the immediately succeeding sentence, not in part, to the
Depositary, its successors or their respective nominees. Interests of beneficial
owners in the Global Notes may be transferred or exchanged for Physical Notes in
accordance with the rules and procedures of the Depositary and the provisions of
Section 2.05 hereof. In addition, Physical Notes shall be transferred to all
beneficial owners in exchange for their beneficial interests in the Global Notes
if (i) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for the Global Notes and a successor depositary is not
appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Note Registrar has received a
written request from the Depositary to issue Physical Notes.
(3) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to paragraph
(2), the Note Registrar shall (if one or more Physical Notes are to be issued)
reflect on its books and records the date and a decrease in the principal amount
of the Global Note in an amount equal to the principal amount of the beneficial
interest in the Global Note to be transferred, and the Company shall execute,
and the Trustee shall authenticate and deliver, one or more Physical Notes of
like tenor and amount.
(4) In connection with the transfer of the beneficial interests in an
entire Global Note to beneficial owners pursuant to paragraph (2), the Global
Note shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the Global Note, an equal aggregate principal amount of Physical
Notes of authorized denominations.
(5) Any Physical Note constituting a Restricted Security delivered in
exchange for a beneficial interest in a Global Note pursuant to paragraph (2) or
(3) shall, except as otherwise provided by paragraphs (1)(a)(x) and (3) of
Section 2.05 hereof, bear the Private Placement Legend.
(6) The owner of a beneficial interest in a Global Note may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Notes.
<PAGE>
-26-
Section 2.05. Special Transfer Provisions.
---------------------------
(1) Transfers to Non-QIB Institutional Accredited Investors and Non-
-----------------------------------------------------------------
U.S. Persons. The following provisions shall apply with respect to the
- ------------
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(a) the Note Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the second
anniversary of the Issue Date or (y) (A) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB (excluding Non-U.S.
Persons), the proposed transferee has delivered to the Note Registrar a
certificate substantially in the form of Exhibit C hereto or (B) in the
---------
case of a transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Note Registrar a certificate substantially in the form of
Exhibit D hereto; and
---------
(b) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Note Registrar
of (x) the certificate, if any, required by paragraph (a) above and (y)
written instructions given in accordance with the Depositary's and the Note
Registrar's procedures,
whereupon (i) the Note Registrar shall reflect on its books and records the date
and (if the transfer does not involve a transfer of outstanding Physical Notes)
a decrease in the principal amount of the applicable Global Note in an amount
equal to the principal amount of the beneficial interest in the Global Note to
be transferred, and (ii) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
(2) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(a) the Note Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided for
on the form of Note stating, or has otherwise advised the Company and the
Note Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has otherwise
advised the Company and the Note Registrar in writing, that it is
purchasing the Note for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such account is
a QIB within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is aware
that the transferor is relying upon its foregoing representations in order
to claim the exemption from registration provided by Rule 144A; and
(b) the proposed transferee is an Agent Member, and the Notes to be
transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in a Global Note, upon receipt by the Note
Registrar of written instructions given in accordance with the Depositary's
and the Note Registrar's procedures, the Note Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the applicable Global Note in an amount equal to the principal amount of
the Physical Notes to be transferred, and the Trustee shall cancel the
Physical Notes so transferred.
<PAGE>
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(3) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Notes not bearing the Private Placement Legend, the Note
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Note Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) the requested transfer is after the second
anniversary of the Issue Date, or (ii) there is delivered to the Note Registrar
an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(4) General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Note Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.04 hereof or this
Section 2.05. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
during the Note Registrar's normal business hours upon the giving of reasonable
written notice to the Note Registrar.
In connection with any transfer of the Notes, the Trustee, the Note
Registrar and the Company shall be entitled to receive, shall be under no duty
to inquire into, may conclusively presume the correctness of, and shall be fully
protected in relying upon the certificates, opinions and other information
referred to herein (or in the forms provided herein, attached hereto or to the
Notes, or otherwise) received from any Holder and any transferee of any Note
regarding the validity, legality and due authorization of any such transfer, the
eligibility of the transferee to receive such Note and any other facts and
circumstances related to such transfer.
ARTICLE THREE
THE NOTES
Section 3.01. Title and Terms.
---------------
The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is limited to $100,000,000, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Section 3.03, 3.04, 3.05, 9.05,
10.12, 10.14, 10.15 or 11.08.
The Notes shall be known and designated as the "10 1/4% Senior
Subordinated Notes due 2007" of the Company. The final Stated Maturity of the
Notes shall be November 1, 2007. Interest on the Notes will accrue at the rate
of 10 1/4% per annum and will be payable semi-annually in arrears on May 1 and
November 1 in each year, commencing on May 1, 1998, to Holders of record on the
immediately preceding April 15 and October 15, respectively. Interest on the
Notes will accrue from the most recent date to which interest has been paid or
duly provided for or, if no interest has been paid, from the Issue Date.
<PAGE>
-28-
The additional terms and provisions contained in the forms of Notes
and the Guarantees, annexed hereto as Exhibits A and E, respectively, shall
----------------
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
Section 3.02. Denominations.
-------------
The Notes shall be issuable only in fully registered form without
coupons and in denominations of $1,000 and any integral multiple thereof.
Section 3.03. Temporary Notes.
---------------
Pending the preparation and delivery of definitive Notes, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes. Temporary Notes may be printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the Officers executing such Notes may consider appropriate, as
conclusively evidenced by their execution of such Notes.
If temporary Notes are issued, the Company will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 10.02, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
Section 3.04. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office and in any other office or
agency designated pursuant to Section 10.02 being herein sometimes referred to
as the "Note Register") in which, subject to such reasonable regulations as the
Person appointed as being responsible for the keeping of the Note Register (the
"Note Registrar") may prescribe, the Company shall provide for the registration
of Notes and of transfers of Notes. The Note Register shall be in written form
or in any form capable of being converted into written form within a reasonable
period of time. The Trustee is hereby initially appointed Note Registrar for the
purpose of registering Notes and transfers of Notes as herein provided. The
Company may appoint one or more co-registrars.
Upon surrender for registration of transfer of any Note at the office
or agency of the Company designated pursuant to Section 10.02, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Notes of any authorized
denomination or denominations, of a like aggregate principal amount and bearing
such restrictive legends as may be required by Section 2.03.
At the option of the Holder, Notes in certificated form may be
exchanged for other Notes of any authorized denomination or denominations, of a
like aggregate principal amount, upon surrender of the Notes to be exchanged at
such office or agency. Whenever any Notes are so surrendered for exchange, the
<PAGE>
-29-
Company shall execute, and the Trustee shall authenticate and deliver, the Notes
which the Holder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same
indebtedness, and entitled to the same benefits under this Indenture, as the
Notes surrendered upon such registration of transfer or exchange and no such
transfer or exchange shall constitute a repayment of any obligation nor create
any new obligations of the Company.
Every Note presented or surrendered for registration of transfer, or
for exchange or redemption, shall (if so required by the Company, the Trustee,
the Note Registrar or any co-registrar) be duly endorsed or be accompanied by a
written instrument of transfer in form satisfactory to the Company, the Trustee,
and the Note Registrar or any co-registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange or redemption of Notes, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 3.03, 9.05, 10.14, 10.15 or 11.08 not
involving any transfer.
None of the Company, the Trustee, the Note Registrar or any co-
registrar shall be required (a) to issue, register the transfer of or exchange
any Note during a period beginning at the opening of business 15 days before the
mailing of a notice of redemption of the Notes selected for redemption and
ending at the close of business on the day of such mailing, (b) to register the
transfer of or exchange any Note so selected for redemption in whole or in part,
except the unredeemed portion of Notes being redeemed in part or (c) to issue,
register, transfer or exchange any Note during a Change of Control Offer or an
Asset Sale Offer, if such note is tendered pursuant to such Change of Control
Offer or Asset Sale Offer.
When Notes are presented to the Note Registrar with a request to
register the transfer or to exchange them for an equal principal amount of Notes
of other authorized denominations, the Registrar shall register the transfer or
make the exchange as requested if its requirements for such transactions are
met. To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Notes at the Note Registrar's
request.
Section 3.05. Mutilated, Destroyed, Lost and Stolen Notes.
-------------------------------------------
If (a) any mutilated Note is surrendered to the Trustee, or (b) the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, and there is delivered to the Company
and the Trustee, such security or indemnity, in each case, as may be required by
them to save each of them harmless from any loss which either of them may suffer
if a Note is replaced, then, in the absence of notice to the Company or the
Trustee that such Note has been acquired by a bona fide purchaser, the Company
shall execute and the Trustee shall authenticate and deliver, in exchange for
any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a
replacement Note of like tenor and principal amount, bearing a number not
contemporaneously outstanding.
Upon the issuance of any replacement Notes under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
<PAGE>
-30-
Every replacement Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 3.06. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid by check or wire
transfer to the Person in whose name that Note (or one or more predecessor
Notes) is registered at the close of business on the Regular Record Date for
such interest.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date and interest on such
defaulted interest at the then applicable interest rate borne by the Notes, to
the extent lawful (such defaulted interest and interest thereon herein
collectively called "Defaulted Interest"), shall forthwith cease to be payable
to the Holder on the Regular Record Date and such Defaulted Interest may be paid
by the Company, at its election in each case, as provided in subsection (a) or
(b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective predecessor
Notes) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing at least
20 days before such payment date of the amount of Defaulted Interest
proposed to be paid on each Note and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this subsection (a) provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company in writing of such Special Record
Date. In the name and at the expense of the Company, the Trustee shall
cause notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage prepaid, to
each Holder at its address as it appears in the Note Register, not less
than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been so mailed, such Defaulted Interest shall be paid to the Persons
in whose names the Notes (or their respective predecessor Notes) are
registered on such Special Record Date and shall no longer be payable
pursuant to the following subsection (b).
(b) any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange, if, after written notice given
by the Company to the Trustee of the proposed payment pursuant to this
subsection (b), such payment shall be deemed practicable by the Trustee.
<PAGE>
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Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
Section 3.07. Persons Deemed Owners.
---------------------
Prior to and at the time of due presentment for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name any Note is registered in the Note Register
as the owner of such Note for the purpose of receiving payment of principal of,
premium, if any, and (subject to Section 3.06) interest on such Note and for all
other purposes whatsoever, whether or not such Note shall be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Section 3.08. Cancellation.
------------
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall be delivered to the Trustee and, if not already
cancelled, shall be promptly cancelled by it. The Company may at any time
deliver to the Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, as evidenced by a Company Order instructing the Trustee that all
Notes so delivered shall be promptly cancelled by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes cancelled as provided in
this Section 3.08, except as expressly permitted by this Indenture. Cancelled
Notes held by the Trustee shall be disposed of as directed by a Company Order;
provided, however, that the Trustee shall not be required to destroy such
- -------- -------
cancelled Notes. The Trustee shall provide the Company with a list of all Notes
that have been cancelled from time to time as requested by the Company.
Section 3.09. Computation of Interest.
-----------------------
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
Section 3.10. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date, date
established for the payment of Defaulted Interest or Stated Maturity of any Note
shall not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Notes) payment of principal, premium, if any, or interest
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the Interest Payment Date,
Redemption Date, date established for the payment of Defaulted Interest or at
the Stated Maturity, as the case may be, and no interest shall accrue with
respect to such payment for the period from and after such Interest Payment
Date, Redemption Date, date established for the payment of Defaulted Interest or
Stated Maturity, as the case may be, to the next succeeding Business Day.
Section 3.11. CUSIP Number.
------------
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and if so, the Trustee may use the CUSIP numbers in notices
of redemption or exchange as a convenience to Holders; provided, however, that
-------- -------
any such notice may state that no representation is made as to the correctness
or
<PAGE>
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accuracy of the CUSIP number printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes. All Initial Notes shall bear identical CUSIP numbers and all Exchange
Notes shall bear identical CUSIP numbers. The Company shall promptly notify the
Trustee in writing of any change in the CUSIP number of the Notes.
Section 3.12. Payment of Additional Interest Under Registration
-------------------------------------------------
Rights Agreement.
- ----------------
Under certain circumstances the Company will be obligated to pay
certain additional amounts of interest to the Holders, as more particularly set
forth in section 2(e) of the Registration Rights Agreement. The terms of
Section 2(e) the Registration Rights Agreement are hereby incorporated herein by
reference and the Company shall be obligated to provide a copy of such
Registration Rights Agreement to the Trustee.
ARTICLE FOUR
DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01. Defeasance.
----------
The Company may, at its option and at any time, terminate the
obligations of the Company and the Guarantors, if any, with respect to
Outstanding Notes ("defeasance"). Such defeasance means that the Company will be
deemed to have paid and discharged the entire Indebtedness represented by the
Outstanding Notes, except for (i) the rights of holders of Outstanding Notes to
receive payment in respect of the principal of, premium, if any, and interest on
such Notes when such payments are due, (ii) the Company's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes and maintain an office or agency for
payments in respect of the Notes, (iii) the rights, powers, trusts, duties and
immunities of the Trustee and (iv) the defeasance provisions of the Indenture.
Section 4.02. Covenant Defeasance.
-------------------
In addition, the Company may, at its option and at any time, elect to
terminate the obligations of the Company and any Guarantor with respect to
Sections 10.05 through 10.20 and the provisions of Article Eight, and any
omission to comply with such obligations will not constitute a Default or an
Event of Default with respect to the Notes ("covenant defeasance"). For this
purpose, such covenant defeasance means that, with respect to the Outstanding
Notes, the Company and the Guarantors may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section
5.01(c), (d) or (e), provided as specified above, the remainder of this
Indenture and such Outstanding Notes shall be unaffected thereby.
Section 4.03. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
In order to exercise either defeasance or covenant defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, U.S.
Government Obligations, or a combination thereof, in
<PAGE>
-33-
such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, and interest on the outstanding Notes at maturity;
(2) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Holders of the Outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred (in the case of defeasance, such opinion must refer to and be
based upon a ruling of the Internal Revenue Service or a change in
applicable federal income tax laws);
(3) no Default shall have occurred and be continuing on the date of
such deposit;
(4) such defeasance or covenant defeasance shall not cause the Trustee
to have a conflicting interest with respect to any securities of the
Company or any Guarantor;
(5) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument to which the Company or any Guarantor is a party or
by which it is bound;
(6) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the trust funds will not be subject to any
rights of Holders of Senior Indebtedness, including, without limitation,
those arising under this Indenture and (B) after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and
(7) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent under this Indenture to either defeasance or covenant defeasance,
as the case may be, have been complied with.
Opinions and certificates required to be delivered under this Section
shall be in compliance with the requirements set forth in Section 1.04 and this
Section 4.03.
Section 4.04. Deposited Money and U.S. Government Obligations To Be
-----------------------------------------------------
Held in Trust; Etc.
- -------------------
Subject to the provisions of the last paragraph of Section 10.03, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or such other Person that would qualify to act as successor
trustee under Article Six, collectively for purposes of this Section 4.04, the
"Trustee") pursuant to Section 4.03 in respect of the Company's election under
either Section 4.01 or 4.02, shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (other than the Company or
any Affiliate of the Company) as the Trustee may determine, to the Holders of
such Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
<PAGE>
-34-
The Company shall pay and indemnify the Trustee and its agents and
hold them harmless against any tax, fee or other charge imposed on or assessed
against the U.S. Government Obligations deposited pursuant to Section 4.03 or
the principal, premium, if any, and interest received in respect thereof other
than any such tax, fee or other charge which by law is for the account of the
Holders of the Defeased Notes.
Anything in this Article Four to the contrary notwithstanding, the
Trustee shall deliver to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 4.03
hereof which, in the opinion of a nationally-recognized firm of independent
public accountants expressed in a written certification thereof to the Trustee,
are in excess of the amount thereof which would then be required to be deposited
to effect an equivalent defeasance or covenant defeasance.
Section 4.05. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 4.03, by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the obligations of the Company and
each of the Guarantors under this Indenture, the Notes and the Guarantees shall
be revived and reinstated as though no deposit had occurred pursuant to Section
4.03, until such time as the Trustee or Paying Agent is permitted to apply all
such money and U.S. Government Obligations in accordance with Section 4.03;
provided, however, that if the Company or the Guarantors make any payment of
principal, premium, if any, or interest on any Note following the reinstatement
of its obligations, the Company or the Guarantors, as the case may be, shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money and U.S. Government Obligations held by the Trustee or Paying
Agent.
Section 4.06. Repayment to Company.
--------------------
The Trustee shall pay to the Company (or, if appropriate, the
Guarantors) upon Company Request any money held by it for the payment of
principal or interest that remains unclaimed for two years. After payment to the
Company or the Guarantors, Noteholders entitled to money must look to the
Company and the Guarantors for payment as general creditors unless an applicable
abandoned property law designates another person and all liability of the
Trustee or Paying Agent with respect to such money shall thereupon cease.
ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
----------------
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
<PAGE>
-35-
(a) default in the payment of the principal of or premium, if any,
when due and payable, on any of the Notes (at its Stated Maturity, upon
optional redemption, required purchase, scheduled principal payment or
otherwise); or
(b) default in the payment of an installment of interest on any of the
Notes, when due and payable, continued for 30 days or more; or
(c) the Company or any Guarantor fails to comply with any of its
obligations described under Article Eight, Section 10.14 or Section 10.15;
or
(d) the Company or any Guarantor fails to perform or observe any other
term, covenant or agreement contained in the Notes, the Note Guarantees or
this Indenture (other than a default specified in (i), (ii) or (iii) above)
for a period of 30 days after written notice of such failure requiring the
Company to remedy the same shall have been given (x) to the Company by the
Trustee or (y) to the Company and the Trustee by the Holders of 25% in
aggregate principal amount of the Notes then outstanding; or
(e) default or defaults under one or more agreements, indentures or
instruments under which the Company or any Restricted Subsidiary then has
outstanding Indebtedness in excess of $7.5 million individually or in the
aggregate and either (a) such Indebtedness is already due and payable in
full or (b) such default or defaults results in the acceleration of the
maturity of such Indebtedness; or
(f) any Note Guarantee ceases to be in full force and effect or is
declared null and void or any Guarantor denies that it has any further
liability under any Note Guarantee, or gives notice to such effect (other
than by reason of the termination of this Indenture or the release of any
such Note Guarantee in accordance with Section 10.10) and such condition
shall have continued for a period of 30 days after notice to the Company by
the Trustee; or
(g) one or more judgments, orders or decrees of any court or
regulatory or administrative agency for the payment of money in excess of
$7.5 million either individually or in the aggregate shall have been
rendered against the Company or any Restricted Subsidiary or any of their
respective properties and shall not have been discharged and either (a) any
creditor shall have commenced an enforcement proceeding upon such judgment,
order or decree, and such judgment is not being appealed by the Company or
(b) there shall have been a period of 60 consecutive days during which a
stay of enforcement of such judgment, order or decree, by reason of a
pending appeal or otherwise, shall not be in effect; or
(h) (i) the Company or any Material Subsidiary commences a voluntary
case or proceeding under any applicable Bankruptcy Law or any other case or
proceeding to be adjudicated bankrupt or insolvent, (ii) the Company or any
Material Subsidiary consents to the entry of a decree or order for relief
in respect of the Company or such Material Subsidiary in an involuntary
case or proceeding under any applicable Bankruptcy Law or to the
commencement of any bankruptcy or insolvency case or proceeding against it,
(iii) the Company or any Material Subsidiary files a petition or answer or
consent seeking reorganization or relief under any applicable Federal or
state law, (iv) the Company or any Material Subsidiary (x) consents to the
filing of such petition or the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or such Material Subsidiary or of any
substantial part of their respective property,
<PAGE>
-36-
(y) makes an assignment for the benefit of creditors or (z) admits in
writing its inability to pay its debts generally as they become due.
The Company shall provide an Officers' Certificate to the Trustee
promptly upon any officer of the Company obtaining knowledge of any Default or
Event of Default that has occurred and, if applicable, describe such Default or
Event of Default and the status thereof.
Section 5.02. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than as specified in Section 5.01(h)
with respect to the Company) shall occur and be continuing, the Trustee, by
notice to the Company, or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding, by notice to the Trustee and the Company,
may declare the principal of, premium, if any, and accrued interest on all of
the outstanding Notes due and payable immediately, upon which declaration all
such amounts payable in respect of the Notes will become and be immediately due
and payable; provided, however, that so long as the New Credit Agreement shall
be in force and effect, if an Event of Default shall have occurred and be
continuing (other than an Event of Default in Section 5.01(h) with respect to
the Company), any such acceleration shall not be effective until the earlier to
occur of (x) five business days following delivery of a notice of such
acceleration to the agent under the New Credit Agreement and (y) the
acceleration of any Indebtedness under the New Credit Agreement. If an Event of
Default specified in Section 5.01(h) above with respect to the Company occurs
and is continuing, then the principal of, premium, if any, and accrued interest
on all of the outstanding Notes will ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder of Notes.
Notwithstanding the preceding paragraph, in the event of a declaration
of acceleration in respect of the Notes because an Event of Default specified in
Section 5.01(e) shall have occurred and be continuing, such declaration of
acceleration will be automatically annulled if the Indebtedness that is the
subject of such Event of Default has been discharged or paid (if permitted by
the terms thereof and this Indenture) or the requisite Holders thereof have
rescinded their declaration of acceleration in respect of such Indebtedness, and
written notice of such discharge or rescission, as the case may be, shall have
been given to the Trustee by the Company, within 60 days after such declaration
of acceleration in respect of the Notes and no other Event of Default has
occurred which has not been cured or waived during such 60-day period.
After a declaration of acceleration, but before a judgment or decree
for payment of the money due has been obtained by the Trustee, the Holders of a
majority in aggregate principal amount of the outstanding Notes, by written
notice to the Company and the Trustee, may rescind such declaration if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(i) all sums paid or advanced by the Trustee under this Indenture
and the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel,
(ii) all overdue interest on all Notes,
(iii) the principal of and premium, if any, on any Notes which have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Notes, and
<PAGE>
-37-
(iv) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the Notes, and
(b) all Events of Default, other than the non-payment of principal
of, premium, if any, and interest on the Notes that has become due solely
by such declaration of acceleration, have been cured or waived.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee; Other Remedies.
- -----------------------
The Company covenants that if an Event of Default in payment of
principal, premium or interest specified in Section 5.01(a) or 5.01(b) hereof
occurs and is continuing, the Company will, upon demand of the Trustee, pay to
the Trustee, for the benefit of the Holders of such Notes, the whole amount then
due and payable on such Notes for principal, premium, if any, and interest, with
interest upon the overdue principal, premium, if any, and, to the extent that
payment of such interest shall be legally enforceable, upon overdue installments
of interest, at the rate then borne by the Notes; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may, but is not
obligated under this paragraph to, institute a judicial proceeding for the
collection of the sums so due and unpaid and may, but is not obligated under
this paragraph to, prosecute such proceeding to judgment or final decree, and
may, but is not obligated under this paragraph to, enforce the same against the
Company, the Guarantors or any other obligor upon the Notes and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Notes, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion, but is not obligated under this paragraph to, (i) proceed to
protect and enforce its rights and the rights of the Holders under this
Indenture and the Notes by such appropriate private or judicial proceedings as
the Trustee shall deem most effectual to protect and enforce such rights,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or the Notes or in aid of the exercise of any power granted
herein or therein, or (ii) proceed to protect and enforce any other proper
remedy. No recovery of any such judgment upon any property of the Company shall
affect or impair any rights, powers or remedies of the Trustee or the Holders.
Section 5.04. Trustee May File Proofs of Claims.
---------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company, the Guarantors or any other obligor
upon the Notes, or the property of the Company, the Guarantors or of such other
obligor or their creditors, the Trustee (irrespective of whether the principal
of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise, but is not obligated under this paragraph
(a) to file and prove a claim for the whole amount of principal,
premium, if any, and interest owing and unpaid in respect of the Notes and
to file such other papers or documents as may be
<PAGE>
-38-
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of
the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
Section 5.05. Trustee May Enforce Claims Without Possession of Notes.
------------------------------------------------------
All rights of action and claims under this Indenture or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name and as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Notes in respect of which such judgment has been recovered.
Section 5.06. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal, premium, if
any, or interest, upon presentation of the Notes and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
First: to the Trustee for amounts due under Section 6.07;
Second: to Holders for interest accrued on the Notes, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Notes for interest;
Third: to Holders for principal amounts owing under the Notes,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal and premium; and
Fourth: to the Company or, to the extent the Trustee collects any
amount from any Guarantor, to such Guarantor.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Noteholders pursuant to this
Section 5.06.
<PAGE>
-39-
Section 5.07. Limitation on Suits.
-------------------
No Holder of any Notes shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) the Holder or Holders of not less than 25.0% in aggregate
principal amount of the Outstanding Notes shall have made written
request(s) to the Trustee to institute proceedings in respect of such Event
of Default in its own name as Trustee hereunder;
(b) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(c) the Trustee for 15 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(d) no direction inconsistent with such written request has been given
to the Trustee during such 15-day period by the Holders of a majority in
aggregate principal amount of the Outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or any Note to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture or any Note except in
the manner provided in this Indenture and for the equal and ratable benefit of
all the Holders.
Section 5.08. Unconditional Right of Holders To Receive Principal, Premium
------------------------------------------------------------
and Interest.
- ------------
Notwithstanding any other provision in this Indenture, the Holder of any
Note shall have the right, which is absolute and unconditional, to receive cash
payment, in United States dollars, of the principal of, premium, if any, and
(subject to Section 3.06 hereof) interest on such Note on the respective Stated
Maturities expressed in such Note (or, in the case of redemption or repurchase,
on the respective Redemption Dates or date fixed for repurchase) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the express consent of such Holder.
Section 5.09. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture or any Note and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
<PAGE>
-40-
Section 5.10. Rights and Remedies Cumulative.
------------------------------
No right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.11. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article Five or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 5.12. Control by Majority.
-------------------
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Notes shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee; provided, however, that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture or any Note or expose the Trustee to liability; and
(b) subject to the provisions of Section 315 of the TIA, the Trustee
may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 5.13. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Notes may on behalf of the Holders of all the Notes waive any
past Default hereunder and its consequences, except a Default:
(a) in the payment of the principal of, premium, if any, or interest
on any Note (which may only be waived with the consent of each Holder of
Notes affected); or
(b) in respect of a covenant or provision under this Indenture which
cannot be modified or amended without the consent of the Holder of each
Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereon.
Section 5.14. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of
<PAGE>
-41-
any right or remedy under this Indenture or the Notes, or in any suit against
the Trustee for any action taken, suffered or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Holder, or group
of Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Notes or to any suit instituted by any Holder for the enforcement of
the payment of the principal of, premium, if any, or interest on any Note on or
after the respective Stated Maturities expressed in such Note (or, in the case
of redemption or repurchase, on or after the respective Redemption Dates or
dates fixed for repurchase).
Section 5.15. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury or
other law wherever enacted, now or at any time hereafter in force, which would
prohibit or forgive the Company from paying all or any portion of the principal
of, premium, if any, or interest on the Notes contemplated herein or in the
Notes or which may affect the covenants or the performance of this Indenture;
and the Company (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee or
its counsel shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
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(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own gross negligent action, its own gross
negligent failure to act, or its own willful misconduct, except that (i) this
paragraph does not limit the effect of paragraph (a) of this Section 6.01; (ii)
the Trustee shall not be liable for any error of judgment made in good faith by
an officer of the Trustee or upon advice of its counsel, unless it is proved
that the Trustee was grossly negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes or
omits to take in good faith in accordance with a direction received by it
pursuant to Section 5.12.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive an indemnity satisfactory to it in
its sole discretion against such risk, liability, loss, fee or expense which
might be incurred by it in compliance with such request or direction.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.01.
Section 6.02. Notice of Defaults.
------------------
Within 90 days after the occurrence of any Default, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the Note
Register, notice of such Default hereunder known to the Trustee; provided,
however, that, except in the case of a Default in the payment of the principal
of, premium, if any, or interest on any Note, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of Responsible Officers or counsel of the Trustee
in good faith determines that the withholding of such notice is in the interest
of the Holders.
Section 6.03. Certain Rights of Trustee.
-------------------------
Subject to Section 6.01 hereof and the provisions of (S) 315 of the
TIA:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
approval, appraisal, bond, debenture, note, coupon, security, other
evidence of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors of the Company may be sufficiently
evidenced by a Board Resolution of the Company thereof;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate of the Company;
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(d) the Trustee and its agents may consult with counsel and any
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon
in accordance with such advice or Opinion of Counsel;
(e) the Trustee and its agents shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, approval, appraisal, bond, debenture, note,
coupon, security, other evidence of indebtedness or other paper or document
but the Trustee in its discretion may make such further inquiry or
investigation into such facts or matters as it may deem fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney during the reasonable business
hours of the Company;
(f) the Trustee and its agents may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent (other than an agent who
is an employee of the Trustee) or attorney appointed with due care by it
hereunder; or
(g) the Trustee shall not be charged with knowledge of any Default or
Event of Default, as the case may be, with respect to the Notes unless
either (1) a Responsible Officer of the Trustee shall have actual knowledge
of the Default or Event of Default, as the case may be, or (2) written
notice of such Default or Event of Default, as the case may be, shall have
been given to the Trustee by the Company, any other obligor on the Notes or
by any Holder of the Notes.
Section 6.04. Trustee Not Responsible for Recitals, Dispositions of
-----------------------------------------------------
Notes or Application of Proceeds Thereof.
- ----------------------------------------
The recitals contained herein and in the Notes, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company
and the Guarantors, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or the Notes, except that the Trustee represents
that it is duly authorized to execute and deliver this Indenture, authenticate
the Notes and perform its obligations hereunder and that the statements made by
it in a Statement of Eligibility and Qualification on Form T-1 supplied to the
Company and the Guarantors in connection with the registration of any Notes and
Guarantees issued hereunder are true and accurate subject to the qualifications
set forth therein. The Trustee shall not be accountable for the use or
application by the Company of Notes or the proceeds thereof.
Section 6.05. Trustee and Agents May Hold Notes; Collections; etc.
---------------------------------------------------
The Trustee, any Paying Agent, Note Registrar or any other agent of
the Company or the Guarantors, in its individual or any other capacity, may
become the owner or pledgee of Notes, with the same rights it would have if it
were not the Trustee, Paying Agent, Note Registrar or such other agent and,
subject to Sections 6.08 and 6.13 hereof and (S)(S) 310 and 311 of the Trust
Indenture Act, may otherwise deal with the Company or the Guarantors and
receive, collect, hold and retain collections from the Company or the Guarantors
with the same rights it would have if it were not the Trustee, Paying Agent,
Note Registrar or such other agent.
<PAGE>
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Section 6.06. Money Held in Trust.
-------------------
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required herein
or by law. The Trustee shall not be under any liability for interest on any
moneys received by it hereunder.
Section 6.07. Compensation and Indemnification of Trustee and Its
---------------------------------------------------
Prior Claim.
- -----------
The Company and the Guarantors covenant and agree: (a) to pay to the
Trustee from time to time, and the Trustee shall be entitled to, reasonable
compensation for all services rendered by it hereunder (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust); (b) to reimburse the Trustee and each predecessor Trustee upon
its request for all reasonable expenses, disbursements and advances incurred or
made by or on behalf of it in accordance with any of the provisions of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its counsel and of all agents and other Persons not regularly
in its employ), except any such reasonable expense, disbursement or advance as
may arise from its negligence or bad faith; and (c) to indemnify the Trustee and
each predecessor Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of this
Indenture or the trusts hereunder and the exercise or performance of any of its
powers or duties hereunder, including enforcement of this Section 6.07. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. The obligations of the Company and the
Guarantors under this Section to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall constitute an additional
obligation hereunder and shall survive the satisfaction and discharge of this
Indenture.
Section 6.08. Conflicting Interests.
---------------------
The Trustee shall be subject to and comply with the provisions of (S)
310(b) of the TIA.
Section 6.09. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA (S)(S) 310(a)(1) and 310(a)(5) and which
shall have a combined capital, surplus and undivided profits of at least
$100,000,000, and have an office or agency at which Notes may be presented for
transfer and redemption and at which demands may be made in The City of New
York. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of United States Federal, state,
territorial or District of Columbia supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Trustee shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 6.10. Resignation and Removal; Appointment of Successor
-------------------------------------------------
Trustee.
- -------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
<PAGE>
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(b) The Trustee, or any trustee or trustees hereinafter appointed, may
at any time resign by giving written notice thereof to the Company and the
Guarantors at least 30 Business Days prior to the date of such proposed
resignation. Upon receiving such notice of resignation, the Company and the
Guarantors shall promptly appoint a successor trustee by written instrument, a
copy of which shall be delivered to the resigning Trustee and a copy to the
successor trustee. If an instrument of acceptance by a successor Trustee shall
not have been delivered to the Trustee within 30 Business Days after the giving
of such notice of resignation, the resigning Trustee may, or any Holder who has
been a bona fide Holder of a Note for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper, appoint a successor
trustee.
(c) The Trustee may be removed at any time with 60 days written notice
by an Act of the Holders of a majority in principal amount of the Outstanding
Notes, delivered to the Trustee, the Company and the Guarantors.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of (S) 310(b)
of the TIA in accordance with Section 6.08 hereof after written request
therefor by the Company, the Guarantors or by any Holder who has been a
bona fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.09 hereof
and shall fail to resign after written request therefor by the Company, the
Guarantors or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent, or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose or
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company or the Guarantors may remove the
Trustee, or (ii) subject to Section 5.14, the Holder of any Note who has been a
bona fide Holder of a Note for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company or the Guarantors shall promptly appoint a successor Trustee. If,
within 60 days after such resignation, removal or incapability, or the
occurrence of such vacancy, and the Company or the Guarantors have not appointed
a successor Trustee, a successor Trustee shall be appointed by act of the
Holders of a majority in principal amount of the Outstanding Notes delivered to
the Company, the Guarantors and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company
and the Guarantors. If no successor Trustee shall have been so appointed by the
Company or the Holders of the Notes and accepted appointment in the manner
hereinafter provided, the Holder of any Note who has been a bona fide Holder for
at least six months may, subject to Section 5.14, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
<PAGE>
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(f) The Company and the Guarantors shall give notice of each
resignation and each removal of the Trustee and each appointment of a successor
Trustee by mailing written notice of such event by first-class mail, postage
prepaid, to the Holders of Notes as their names and addresses appear in the Note
Register. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
Section 6.11. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company, the Guarantors and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee as if originally named
as Trustee hereunder; but, nevertheless, on the written request of the Company,
the Guarantors or the successor Trustee, upon payment of amounts due it pursuant
to Section 6.07, such retiring Trustee shall duly assign, transfer and deliver
to the successor Trustee all moneys and property at the time held by it
hereunder and shall execute and deliver an instrument transferring to such
successor Trustee all the rights, powers, duties and obligations of the retiring
Trustee. Upon request of any such successor Trustee, the Company and the
Guarantors shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights and powers.
No successor Trustee with respect to the Notes shall accept
appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor Trustee shall be eligible to act as Trustee under this
Article.
Upon acceptance of appointment by any successor Trustee as provided in
this Section 6.11, the Company and the Guarantors shall give notice thereof to
the Holders of the Notes, by mailing such notice to such Holders at their
addresses as they shall appear on the Note Register. If the acceptance of
appointment is substantially contemporaneous with the resignation, then the
notice called for by the preceding sentence may be combined with the notice
called for by Section 6.10(f). If the Company or the Guarantors fail to give
such notice within 10 days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be given at the
expense of the Company.
Section 6.12. Successor Trustee by Merger, etc.
--------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion, or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, provided such corporation shall be eligible under this
Article to serve as Trustee hereunder.
In case at the time such successor to the Trustee under this Section
6.12 shall succeed to the trusts created by this Indenture any of the Notes
shall have been authenticated but not delivered, any such successor to the
Trustee may adopt the certificate of authentication of any predecessor Trustee
and deliver such Notes so authenticated; and, in case at that time any of the
Notes shall not have been authenticated, any successor to the Trustee under this
Section 6.12 may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificate shall have the full force which it is anywhere in the Notes or in
this Indenture provided that the certificate of the Trustee shall have been
authenticated.
<PAGE>
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Section 6.13. Preferential Collection of Claims Against Issuers.
-------------------------------------------------
The Trustee shall comply with Section 311(a) of the TIA, excluding any
creditor relationship listed in (S) 311(b) of the TIA. If the present or any
future Trustee shall resign or be removed, it shall be subject to (S) 311(a) of
the TIA to the extent provided therein.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.01. Preservation of Information; Company To Furnish Trustee
-------------------------------------------------------
Names and Addresses of Holders.
- ------------------------------
(a) The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders; provided, however, that if and for so long as the Trustee shall be
the Note Registrar, the Note Register shall satisfy the requirements relating to
such list. Neither the Company, the Guarantors or the Trustee shall be under
any responsibility with regard to the accuracy of such list.
(b) The Company will furnish or cause to be furnished to the Trustee
(i) semiannually, not more than 10 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date; and
(ii) at such other times as the Trustee may request in writing,
within 30 days after receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Note
- -------- -------
Registrar, no such list need be furnished pursuant to this Section 7.01(b)
Section 7.02. Communications of Holders.
-------------------------
Holders may communicate with other Holders with respect to their
rights under this Indenture or under the Notes pursuant to (S) 312(b) of the
TIA. The Trustee shall comply with (S) 312(b) of the TIA. The Company, the
Guarantors and the Trustee and any and all other Persons benefited by this
Indenture shall have the protection afforded by (S) 312(c) of the TIA.
Section 7.03. Reports by Trustee.
------------------
Within 60 days after April 1 of each year commencing with the first
April 1 following the date of this Indenture, the Trustee shall mail to all
Holders, as their names and addresses appear in the Note Register, a brief
report dated as of such April 1 that complies with (S) 313(a) of the TIA;
provided, however, that if no such event as described in (S) 313(a) of the TIA
has occurred within such period then no such report need be transmitted. The
Trustee shall also comply with (S)(S) 313(b), 313(c) and 313(d) of the TIA. At
the
<PAGE>
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time of its mailing to Holders, a copy of each report shall be filed with the
Company, the Guarantors, the Commission and with each national securities
exchange on which the Notes are listed. The Company shall notify the Trustee
when the Notes are listed on any stock exchange or any delisting thereof.
Section 7.04. Reports by Company.
------------------
The Company shall file with the Trustee copies of the reports and of
the information and documents which the Company is required to provide to any
Person under Section 10.09, 10.10 and 10.15.
ARTICLE EIGHT
SUCCESSOR CORPORATION
Section 8.01. When Company May Merge, etc.
---------------------------
The Company shall not, in any transaction or series of related
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any Person or Persons, and the Company
shall not permit any of the Restricted Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and the Restricted Subsidiaries
(determined on a consolidated basis for the Company and the Restricted
Subsidiary), to any Person or Persons, unless at the time and after giving
effect thereto (i) either (A)(1) if the transaction or transactions is a merger
or consolidation involving the Company, the Company shall be the Surviving
Person of such merger or consolidation or (2) if the transaction or transactions
is a merger or consolidation involving a Restricted Subsidiary, such Restricted
Subsidiary shall be the Surviving Person of such merger or consolidation, or
(B)(1) the Surviving Person shall be a corporation organized and existing under
the laws of the United States of America, any State thereof or the District of
Columbia and (2)(x) in the case of a transaction involving the Company, the
Surviving Person shall expressly assume by a supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and this Indenture and the
Registration Rights Agreement, and in each case, this Indenture and the
Registration Rights Agreement shall remain in full force and effect, or (y) in
the case of a transaction involving a Restricted Subsidiary that is a Guarantor,
the Surviving Person shall expressly assume by a supplemental indenture executed
and delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of such Restricted Subsidiary under its Note Guarantee and this
Indenture and the Registration Rights Agreement, and in each case, such
Indenture and the Registration Rights Agreement shall remain in full force and
effect; (ii) immediately after giving effect to such transaction or series of
related transactions on a pro forma basis, no Default shall have occurred and be
continuing; and (iii) the Company, or the Surviving Person, as the case may be,
immediately after giving effect to such transaction or series of transactions on
a pro forma basis (including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such transaction
or series of transactions), could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under Section 10.11, provided, that the foregoing
shall not be applicable to the DMC Acquisition if it is effected as a merger.
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby (other than the DMC Acquisition, if effected as
a merger), the Company shall deliver, or cause
<PAGE>
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to be delivered, to the Trustee, in form and substance reasonably satisfactory
to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, transfer, lease or other disposition and the
supplemental indenture in respect thereof comply with the requirements under
this Indenture. In addition, each Guarantor, in the case of a transaction
described in the first paragraph under this Section 8.01, unless it is the other
party to the transaction or unless its Note Guarantee will be released and
discharged in accordance with its terms as a result of the transaction, will be
required to confirm, by supplemental indenture, that its Note Guarantee will
continue to apply to the obligations of the Company or the Surviving Person
under this Indenture.
Section 8.02. Successor Substituted.
---------------------
Upon any consolidation or merger of the Company or any Guarantor or
any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company or a Guarantor is not the
Surviving Person, the Surviving Person shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture and
the Notes and the Registration Rights Agreement or such Guarantor under this
Indenture, the Note Guarantee of such Guarantor and the Registration Rights
Agreement, as the case may be, with the same effect as if such successor
corporation had been named as the Company or Guarantor, as the case may be,
therein; and thereafter, except in the case of (a) a lease or (b) any sale,
assignment, conveyance, transfer, lease or other disposition to a Restricted
Subsidiary of the Company or such Guarantor, the Company shall be discharged
from all obligations and covenants under this Indenture and the Notes and such
Guarantor shall be discharged from all obligations and covenants under this
Indenture and the Note Guarantee of such Guarantor, as the case may be.
For all purposes of this Indenture and the Notes (including the
provisions of this Article Eight and Sections 10.11 and 10.12 and 10.16),
Subsidiaries of any Surviving Person shall, upon such transaction or series of
related transactions, become Restricted Subsidiaries unless and until designated
as Unrestricted Subsidiaries pursuant to and in accordance with Section 10.19
and all Indebtedness, and all Liens on property or assets, of the Company and
the Restricted Subsidiaries in existence immediately prior to such transaction
or series of related transactions will be deemed to have been incurred upon
consummation of such transaction or series of related transactions.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. Without Consent of Holders.
--------------------------
The Company, the Guarantors, if any, when authorized by their board of
directors, and the Trustee may, without the consent of the Holders of any
Outstanding Notes, amend, waive or supplement this Indenture or the Notes:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article Eight;
(c) to provide for uncertificated Notes in addition to certificated
Notes;
<PAGE>
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(d) to comply with any requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA;
(e) to provide for additional Guarantors of the Notes;
(f) to evidence the release of any Guarantor in accordance with
Article Thirteen hereof;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes;
(h) to amend this Indenture to delete Section 13.07(a) in its
entirety; or
(i) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder;
provided, however, that the Company has delivered to the Trustee an
Opinion of Counsel stating that such change does not materially adversely
affect the legal rights of any Holder.
Section 9.02. With Consent of Holders.
-----------------------
Except as provided in Section 9.01, other amendments and modifications
of this Indenture or the Notes may be made by the Company, the Guarantors, if
any, and the Trustee with the consent of the Holders of not less than a majority
of the aggregate principal amount of the outstanding Notes; provided, however,
that no such modification or amendment may, without the consent of the Holder of
each outstanding Note affected thereby,
(i) change the maturity of the principal of or any installment of
interest on any such Note or alter the optional redemption or repurchase
provisions of any such Note or this Indenture in a manner adverse to the
Holders;
(ii) reduce the principal amount (or the premium) of any such Note;
(iii) reduce the rate of or extend the time for payment of interest on
any such Note;
(iv) change the place or currency of payment of principal of (or
premium) or interest on any such Note;
(v) modify any provisions of this Indenture relating to the waiver of
past defaults (other than to add sections of this Indenture or the Notes
subject thereto) or the right of the Holders to institute suit for the
enforcement of any payment on or with respect to any such Note or any Note
Guarantee in respect thereof or the modification and amendment provisions
of this Indenture and the Notes (other than to add sections of this
Indenture or the Notes which may not be amended, supplemented or waived
without the consent of each Holder therein affected);
(vi) reduce the percentage of the principal amount of outstanding Notes
necessary for amendment to or waiver of compliance with any provision of
this Indenture or the Notes or for waiver of any Default in respect
thereof;
<PAGE>
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(vii) waive a default in the payment of principal of, interest on, or
redemption payment with respect to, the Notes (except a rescission of
acceleration of the Notes by the Holders thereof as provided in this
Indenture and a waiver of the payment default that resulted from such
acceleration);
(viii) modify the ranking or priority of any Note or the Note Guarantee
in respect thereof of any Guarantor or modify the definition of Senior
Indebtedness or Guarantor Senior Indebtedness or amend or modify the
subordination provisions of this Indenture in any manner adverse to the
Holders of the Notes; or
(ix) release any Guarantor from any of its obligations under its Note
Guarantee or this Indenture otherwise than in accordance with this
Indenture.
The Holders of a majority in aggregate principal amount of the
outstanding Notes, on behalf of all Holders of Notes, may waive compliance by
the Company and the Guarantors with certain restrictive provisions of this
Indenture. Subject to certain rights of the Trustee, as provided in this
Indenture, the Holders of a majority in aggregate principal amount of the Notes,
on behalf of all Holders of the Notes, may waive any past default under this
Indenture (including any such waiver obtained in connection with a tender offer
or exchange offer for the Notes), except a default in the payment of principal,
premium or interest or a default arising from failure to purchase any Notes
tendered pursuant to an optional redemption or repurchase, or a default in
respect of a provision hereunder that cannot be modified or amended without the
consent of the Holder of each Note that is affected.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
Section 9.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment of or supplement to this Indenture or the Notes shall
comply with the TIA as then in effect if this Indenture shall then be qualified
under the TIA.
Section 9.04. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article
Nine, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 9.05. Revocation and Effect of Consents.
---------------------------------
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of that
Note or portion of that Note that evidences the same debt as the consenting
Holder's Note, even if notation of the consent is not made on any note. Subject
to the following paragraph, any such Holder or subsequent Holder may revoke the
consent as to such Holder's Note or portion of such Note by notice to the
Trustee or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Notes have consented (and not theretofor revoked such consent) to the
amendment, supplement or waiver.
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The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
sentence of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to consent to such amendment, supplement or waiver or to
revoke any consent previously given, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder of Notes, unless it makes a change described in any of clauses
(i) through (ix) of Section 9.02. In that case, the amendment, supplement or
waiver shall bind each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note
Section 9.06. Notation on or Exchange of Notes.
--------------------------------
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee shall (in accordance with the specific direction of the Company) request
the Holder of the Note to deliver it to the Trustee. The Trustee shall (in
accordance with the specific direction of the Company) place an appropriate
notation on the Note about the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Note shall issue and the Trustee shall authenticate a new Note
that reflects the changed terms. Failure to make the appropriate notation or
issue a new Note shall not affect the validity and effect of such amendment,
supplement or waiver.
Section 9.07. Trustee May Sign Amendments, etc.
--------------------------------
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article Nine if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If such amendment, supplement or waiver does affect the rights, duties,
liabilities or immunities of the Trustee, the Trustee may, but need not, sign
it. In signing or refusing to sign such amendment, supplement or waiver, the
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that the
execution of any amendment, supplement or waiver is authorized or permitted by
this Indenture, that it is not inconsistent herewith and that it will be valid
and binding upon the Company in accordance with its terms.
ARTICLE TEN
COVENANTS
Section 10.01. Payment of Principal, Premium and Interest.
------------------------------------------
The Company will duly and punctually pay the principal of, premium, if
any, and interest on the Notes in accordance with the terms of the Notes and
this Indenture.
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Section 10.02. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in The City of New York, an office or agency
where Notes may be presented or surrendered for payment, where Notes and the
Guarantees may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company or any Guarantor in respect of the
Notes, the Guarantees and this Indenture may be served. The office of the
Trustee shall be such office or agency of the Company, unless the Company shall
designate and maintain some other office or agency for one or more of such
purposes. The Company will give prompt written notice to the Trustee of any
change in the location of any such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Notes and
the Guarantees may be presented or surrendered for any or all such purposes, and
may from time to time rescind such designation; provided, however, that no such
-------- -------
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan in The
City of New York for such purposes. The Company will give prompt written notice
to the Trustee of any such designation or rescission and any change in the
location of any such other office or agency.
Section 10.03. Money for Note Payments To Be Held in Trust.
-------------------------------------------
If the Company shall at any time act as its own Paying Agent, the
Company will, on or before each due date of the principal of, premium, if any,
or interest on any of the Notes, segregate and hold in trust for the benefit of
the Holders entitled thereto a sum sufficient to pay the principal, premium, if
any, or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided, and will promptly notify the
Trustee of its action or failure so to act.
If the Company is not acting as Paying Agent, the Company will, on or
before each due date of the principal of, premium, if any, or interest on any
Notes, deposit with a Paying Agent a sum in same day funds sufficient to pay the
principal, premium, if any, or interest so becoming due, such sum to be held in
trust for the benefit of the Holders entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of such action or any failure so to act.
If the Company is not acting as Paying Agent, the Company will cause
each Paying Agent other than the Trustee to execute and deliver to the Trustee
an instrument in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section 10.03, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Notes in trust for the benefit of the
Holders entitled thereto until such sums shall be paid to such Holders or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company (or any
other obligor upon the Notes) in the making of any payment of principal of,
premium, if any, or interest on the Notes;
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
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(d) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and liabilities
of such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company upon receipt of a Company Request therefor, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such Note
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, shall at the
expense of the Company cause to be published once, in The New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
Section 10.04. Existence.
---------
Subject to Article Eight, each of the Company and each Guarantor will
do or cause to be done all things necessary to and will cause each of its
Restricted Subsidiaries to preserve and keep in full force and effect its
corporate existence and the corporate existence of each of the Restricted
Subsidiaries, and the rights (charter and statutory), licenses and franchises of
the Company and each of the Restricted Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company, the Guarantors
and their respective Restricted Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders; provided,
further, however, that the foregoing shall not prohibit a sale, transfer or
conveyance of a Subsidiary of the Company or any of its assets or Capital Stock
in compliance with the terms of this Indenture.
Section 10.05. Payment of Taxes and Other Claims.
---------------------------------
The Company and each Guarantor shall pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, (a) all taxes,
assessments and governmental charges levied or imposed (i) upon the Company or
any of its Restricted Subsidiaries or (ii) upon the income, profits or property
of the Company or any of its Restricted Subsidiaries and (b) all material lawful
claims for labor, materials and supplies, which, if unpaid, might by law become
a Lien upon the property of the Company or any of its Restricted Subsidiaries;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings properly instituted and diligently conducted.
<PAGE>
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Section 10.06. Maintenance of Properties.
-------------------------
The Company and each Guarantor shall, and shall cause each of their
respective Restricted Subsidiaries to, cause all material properties owned by
the Company or the Restricted Subsidiaries or used or held for use in the
conduct of its business or the business of the Restricted Subsidiaries to be
maintained and kept in good condition, repair and working order (reasonable wear
and tear excepted) and supplied with all necessary equipment and will cause to
be made all repairs, renewals, replacements, betterments and improvements
thereof, all as shall be reasonably necessary so that the business carried on in
connection therewith may be conducted at all times in the ordinary course;
provided, however, that nothing in this Section 10.06 shall prevent the Company,
any Guarantor or any of their respective Subsidiaries from discontinuing the
operation and maintenance of any of such properties if (x) such discontinuance
is, in the judgment of the Company, the Guarantor, or the Restricted Subsidiary,
desirable in the conduct of its businesses or (y) if such discontinuance or
disposal is not materially adverse to either the Company, the Guarantors and
their respective Restricted Subsidiaries taken as a whole or the ability of the
Company and the Guarantors taken as a whole to otherwise satisfy its obligations
hereunder.
Section 10.07. Insurance.
---------
The Company will at all times keep all of its and the Restricted
Subsidiaries' properties which are of an insurable nature insured with insurers,
believed by the Company in good faith to be financially sound and responsible,
against loss or damage to the extent that property of similar character is
usually so insured by corporations similarly situated and owning like properties
(which may include self-insurance, if reasonable and in comparable form to that
maintained by companies similarly situated) except where the failure to do so
could not reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs or prospects of
the Company and the Restricted Subsidiaries, taken as a whole.
Section 10.08. Compliance Certificate.
----------------------
(a) The Company will deliver to the Trustee within 120 days after the
end of each of the Company's fiscal years a certificate to the Trustee at least
annually from the chief financial officer (or if the Company does not have a
chief financial officer, the Company's principal executive, financial or
accounting officer) of the Company as to his or her knowledge of the compliance
of the Company, the Guarantors and the Restricted Subsidiaries with all
conditions and covenants under this Indenture and any related documents and
whether any Default or Event of Default has occurred, such compliance to be
determined without regard to any period of grace or requirement of notice
provided herein.
(b) The Company will deliver to the Trustee as soon as possible, and
in any event within 10 days after the Company becomes aware of the occurrence of
any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company or the applicable
Guarantor, as the case may be, is taking or proposes to take with respect
thereto.
Section 10.09. Reporting Requirements.
----------------------
So long as any of the Notes are outstanding, the Company will file
with the Commission, to the extent then permitted by the Commission, the annual
reports, quarterly reports and other documents that the Company would have been
required to file with the Commission pursuant to Sections 13(a) and 15(d) of the
Exchange Act if the Company was subject to such Sections, and the Company will
promptly provide to the
<PAGE>
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Trustee copies of such reports and documents; provided, however, that if the
Company is for any reason unable to make such filings it will make available,
upon request, to any Holder of Notes or prospective purchaser of Notes the
information specified in Rule 144A(d)(4) of the Securities Act.
Section 10.10. Limitation on Guarantees by Restricted Subsidiaries.
---------------------------------------------------
The Company shall not cause or permit any of the Domestic
Subsidiaries, directly or indirectly, to guarantee the payment of any
Indebtedness of the Company or any Restricted Subsidiary unless such Domestic
Subsidiary (A) is a Guarantor or (B) simultaneously executes and delivers a
supplemental indenture to this Indenture pursuant to which it will become a
Guarantor on the basis provided for in Article Thirteen of this Indenture.
Notwithstanding the foregoing, any Note Guarantee by a Restricted Subsidiary
shall be automatically and unconditionally released and discharged upon any
sale, exchange or transfer, to any Person not an Affiliate of the Company, of
all of the Capital Stock of such Restricted Subsidiary, or all or substantially
all the assets of such Restricted Subsidiary, pursuant to a transaction which is
in compliance with this Indenture. The Company may, at any time, cause a
Restricted Subsidiary to become a Guarantor by executing and delivering a
supplemental indenture providing for the guarantee of payment of the Notes by
such Restricted Subsidiary on the basis provided in this Indenture.
Section 10.11. Limitation on Indebtedness.
--------------------------
(a) The Company shall not, and shall not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create, incur, assume,
issue, guarantee or in any manner become liable for or with respect to,
contingently or otherwise (in each case, to "incur"), the payment of any
Indebtedness (including any Acquired Indebtedness); provided, however, that (i)
the Company and any Guarantor may incur Indebtedness (including Acquired
Indebtedness) and (ii) a Restricted Subsidiary may incur Acquired Indebtedness,
in each case if immediately after giving pro forma effect thereto, the
Consolidated Fixed Charge Coverage Ratio of the Company and its Restricted
Subsidiaries is at least equal to 2.0:1.0.
(b) Notwithstanding the foregoing, the Company and, to the extent
specifically set forth below, the Restricted Subsidiaries may incur each and all
of the following (collectively, "Permitted Indebtedness"):
(i) Indebtedness of the Company or any Guarantor under the New
Credit Agreement in an aggregate principal amount at any time outstanding
not to exceed the greater of (x) $50 million and (y) the sum of 85% of the
consolidated book value of the net accounts receivable and 65% of the
consolidated book value of the inventory of the Company and its Restricted
Subsidiaries, in each case determined in accordance with GAAP;
(ii) Indebtedness under this Indenture, the Notes and the Note
Guarantees;
(iii) Indebtedness of the Company or any Restricted Subsidiary not
otherwise referred to in this paragraph that is outstanding on the Issue
Date, except Indebtedness repaid with the proceeds of the issuance of the
Notes as described under "Use of Proceeds" in the Offering Memorandum
(which is permitted hereunder);
(iv) Indebtedness of the Company or any Restricted Subsidiary in
respect of bid, payment or performance bonds, bankers' acceptances, letters
of credit of the Company or any Restricted
<PAGE>
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Subsidiary and surety bonds provided by the Company or any Restricted
Subsidiary in the ordinary course of business;
(v) Indebtedness of any Restricted Subsidiary owed to and held by
the Company or any Restricted Subsidiary, and Indebtedness of the Company
owed to and held by any other Restricted Subsidiary which is unsecured and
subordinated in right of payment to the payment and performance of the
Company's obligations under this Indenture and the Notes;
(vi) any guarantees of Indebtedness by a Restricted Subsidiary
incurred in compliance with Section 10.10;
(vii) Interest Rate Protection Obligations of the Company or any
Restricted Subsidiary covering Indebtedness of the Company or any
Restricted Subsidiary (which Indebtedness (a) bears interest at fluctuating
interest rates and (b) is otherwise permitted to be incurred under this
Section 10.11) to the extent the notional principal amount of such Interest
Rate Protection Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Rate Protection Obligations relate;
(viii) Indebtedness of the Company in respect of Purchase Money
Indebtedness in an amount not exceeding $2.0 million incurred in any one
fiscal year;
(ix) Indebtedness of the Company or any Restricted Subsidiary under
Currency Agreements relating to (a) Indebtedness of the Company or any
Restricted Subsidiary and/or (b) obligations to purchase or sell assets or
properties, in each case, incurred in the ordinary course of business of
the Company or any Restricted Subsidiary; provided, however, that such
Currency Agreements do not increase the Indebtedness or other obligations
of the Company and its Restricted Subsidiaries outstanding other than as a
result of fluctuations in foreign currency exchange rates or by reason of
fees, indemnities and compensation payable thereunder;
(x) (a) Indebtedness of the Company or any Guarantor to the extent
the proceeds thereof are used to Refinance Indebtedness of the Company or
any Guarantor or any Restricted Subsidiary and (b) Indebtedness of any
Restricted Subsidiary that is not a Guarantor to the extent the proceeds
thereof are used to Refinance Indebtedness of any Restricted Subsidiary
that is not a Guarantor, in each case other than the Indebtedness to be
Refinanced as described under "Use of Proceeds" in the Offering Memorandum
and Indebtedness incurred under clause (i) or (v) above; provided, however,
that, in the case of either clause (a) or (b), (1) the principal amount of
Indebtedness incurred pursuant to this clause (x) (or, if such Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof, the
original issue price of such Indebtedness) shall not exceed the sum of (A)
the principal amount of Indebtedness so Refinanced (or, if such
Indebtedness provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration of the maturity
thereof, the original issue price of such Indebtedness, plus any accreted
value attributable thereto since the original issuance of such
Indebtedness, plus any accreted value attributable thereto since the
issuance date of such Indebtedness), plus (B) the amount of any premium
required to be paid in connection with such Refinancing pursuant to the
terms of such Indebtedness or the amount of any premium reasonably
determined by the Company or a Restricted Subsidiary, as applicable, as
necessary to accomplish such Refinancing by means of a tender offer or
privately negotiated purchase, plus (C) the amount of expenses in
connection with such Refinancing; and (2) except in the case of Refinancing
or replacement of Senior In-
<PAGE>
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debtedness or Guarantor Senior Indebtedness or of any Indebtedness of any
Restricted Subsidiary that is not a Guarantor, Indebtedness incurred
pursuant to this clause (x) shall not reduce the Average Life to Stated
Maturity of Indebtedness so Refinanced;
(xi) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from guarantees of letters of credit, surety bonds or payment or
performance bonds securing any obligations of the Company pursuant to such
agreements, incurred or assumed in connection with the disposition of any
business, assets or Subsidiary of the Company, other than guarantees or
similar credit support by the Company of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or Subsidiary
for the purpose of financing such acquisition; and
(xii) in addition to the items referred to in clauses (i) through (xi)
above, additional Indebtedness of the Company or any Restricted Subsidiary
not to exceed an aggregate principal amount at any time outstanding of
$25.0 million.
Section 10.12. Limitation on Restricted Payments.
---------------------------------
(a) The Company shall not, and shall not cause or permit any of the
Restricted Subsidiaries, directly or indirectly, to:
(i) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any Restricted
Subsidiary or any payment made to the direct or indirect Holders (in their
capacities as such) of Capital Stock of the Company or any Restricted
Subsidiary (other than dividends or distributions made to the Company or a
Restricted Subsidiary and dividends and distributions payable solely in
Capital Stock of the Company (other than Redeemable Capital Stock) or in
rights to purchase Capital Stock of the Company (other than Redeemable
Capital Stock)); or
(ii) purchase, redeem, defease or otherwise acquire or retire for
value any Capital Stock of the Company or any Restricted Subsidiary (other
than any such Capital Stock owned by the Company or a Restricted
Subsidiary); or
(iii) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any Subordinated
Indebtedness owed to and held by a Restricted Subsidiary); or
(iv) make any Investment (other than a Permitted Investment) in any
Person (such payments or Investments described in clauses (i), (ii), (iii)
and (iv) are collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than in cash, being the
Fair Market Value of the asset(s) proposed to be transferred by the Company
or such Restricted Subsidiary, as the case may be, pursuant to such
Restricted Payment):
(A) no Default shall have occurred and be continuing;
<PAGE>
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(B) the Company could incur $1.00 of additional Indebtedness by
virtue of the Consolidated Fixed Charge Coverage Ratio set forth in
Section 10.11(a); and
(C) the aggregate amount of all Restricted Payments declared or
made (and not repaid or reimbursed) from and after the Issue Date
would not exceed the sum of (1) 50% of cumulative Consolidated Net
Income of the Company during the period (treated as one accounting
period) beginning on the first day of the fiscal quarter that includes
the Issue Date and ending on the last day of the fiscal quarter of the
Company immediately preceding the date of such proposed Restricted
Payment for which consolidated financial information of the Company is
internally available (or, if such cumulative Consolidated Net Income
of the Company for such period shall be a deficit, minus 100% of such
deficit), plus (2) the aggregate net cash proceeds received by the
Company either (x) as capital contributions in the form of common
equity to the Company after the Issue Date or (y) from the issuance or
sale of Capital Stock (excluding Redeemable Capital Stock and Capital
Stock to the extent the proceeds from the sale thereof are used to
redeem Notes but including Capital Stock issued upon the conversion of
convertible Indebtedness, in exchange for outstanding Indebtedness or
from the exercise of options, warrants or rights to purchase Capital
Stock (other than Redeemable Capital Stock)) of the Company to any
Person (other than to a Restricted Subsidiary of the Company) after
the Issue Date (excluding the net cash proceeds from any issuance and
sale of Capital Stock financed using funds borrowed from the Company
or any Restricted Subsidiary until and to the extent such borrowing is
repaid), plus (3) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Issue
Date, an amount equal to the lesser of the return of capital with
respect to such Investment and the initial amount of such Investment
which was treated as a Restricted Payment, in either case, less the
cost of the disposition of such Investment.
For purposes of the preceding clause (C)(2), upon the issuance of
Capital Stock either from the conversion of convertible Indebtedness or exchange
for outstanding Indebtedness or upon the exercise of options, warrants or
rights, the amount counted as net cash proceeds received will be the cash amount
received by the Company at the original issuance of the Indebtedness that is so
converted or exchanged or from the issuance of options, warrants or rights, as
the case may be, plus the incremental amount of cash received by the Company, if
any, upon the conversion, exchange or exercise thereof.
(b) None of the provisions of Section 10.12(a) will prohibit:
(i) the payment of any dividend within 60 days after the date of its
declaration, if at the date of declaration such payment would be permitted
by the provisions of this Indenture;
(ii) so long as no Default shall have occurred and be continuing or
would occur upon the consummation thereof, the redemption, repurchase or
other acquisition or retirement of any shares of any class of Capital Stock
of the Company in exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale of other shares of Capital Stock
(other than Redeemable Capital Stock) of the Company to any Person (other
than to a Restricted Subsidiary); provided, however, that any such net
proceeds and the value of any Capital Stock issued in exchange for such
retired Capital Stock are excluded from clause (C)(2) of the preceding
paragraph;
(iii) so long as no Default shall have occurred and be continuing or
would occur upon the consummation thereof, any redemption, repurchase or
other acquisition or retirement of Subordi-
<PAGE>
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nated Indebtedness made by exchange for, or out of the net cash proceeds
of, a substantially concurrent issue and sale of (A) Capital Stock (other
than Redeemable Capital Stock) of the Company to any Person (other than to
a Restricted Subsidiary); provided, however, that any such net cash
proceeds and the value of any Capital Stock issued in exchange for
Subordinated Indebtedness are excluded from clause (C)(2) of the preceding
paragraph; or (B) Indebtedness of the Company or any Restricted Subsidiary
so long as such Indebtedness (1) is subordinated to Senior Indebtedness and
the Notes or Guarantor Senior Indebtedness and the Note Guarantees of such
Guarantor, as the case may be, at least to the same extent as the
Subordinated Indebtedness so purchased, exchanged, redeemed, repurchased,
acquired or retired, and (2) has no Stated Maturity earlier than the Stated
Maturity for the final scheduled principal payment of the Notes;
(iv) Investments constituting Restricted Payments made as a result of
the receipt of non-cash consideration from any Asset Sale made pursuant to
and in compliance with Section 10.14;
(v) the application of the net proceeds of the Offering on the Issue
Date, as described under "Use of Proceeds" in the Offering Memorandum;
(vi) so long as no Default shall have occurred and be continuing or
would occur upon the consummation thereof, the purchase, redemption or
other acquisition, cancellation or retirement for value of Capital Stock,
or options, warrants, equity appreciation rights or other rights to
purchase or acquire Capital Stock, of the Company or any Restricted
Subsidiary, or similar securities, held by officers or employees or former
officers or employees of the Company or any Restricted Subsidiary (or their
estates or beneficiaries under their estates), upon death, disability,
retirement or termination of employment (collectively "Repurchase
Payments"), in an amount not to exceed $2.0 million in any single fiscal
year, provided that to the extent such $2.0 million amount is not utilized
in any single fiscal year (beginning in the fiscal year containing the
Issue Date) such amount may be utilized in any future fiscal year;
(vii) so long as no Default shall have occurred and be continuing or
would occur upon the consummation thereof, in addition to Repurchase
Payments permitted under clause (vi), Repurchase Payments in an amount not
to exceed 50% of the sum of (A) Consolidated Net Income plus (B)
Consolidated Non-cash Charges minus (C) capital expenditures made by the
Company minus (D) other Repurchase Payments previously made pursuant to
this clause (vii), in each case determined with respect to the Company and
its Restricted Subsidiaries on a consolidated basis in accordance with GAAP
for the four full fiscal quarters immediately preceding the date of any
such proposed Repurchase Payment for which consolidated financial
information of the Company is internally available; provided, however, that
prior to making any such Repurchase Payment under this clause (vii) the
Company shall have first made an offer to purchase (which offer will be
required to be kept open for a period of at least 20 business days after
commencement thereof) to all Holders of outstanding Notes up to a maximum
principal amount (expressed as a multiple of $1,000) of Notes equal to such
proposed Repurchase Payment (which, if consummated, shall be effected pro
rata based upon the aggregate principal amount of such Notes tendered by
each Holder), at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the date of
such purchase; and to the extent the amount of such proposed Repurchase
Payment exceeds the aggregate amount of Notes tendered by the Holders of
the Notes pursuant to such offer, the Company may make such Repurchase
Payment;
<PAGE>
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(viii) loans or advances to officers, directors and employees of the
Company or any Restricted Subsidiary in an aggregate amount not in excess
of $2.5 million at any one time outstanding;
(ix) so long as no Default shall have occurred and be continuing
or would occur upon the consummation thereof, dividends or distributions to
Permitted Holders who are also officers or directors of the Company, in an
aggregate amount not to exceed $2.0 million in respect of any single fiscal
year of the Company;
(x) payments by the Company in satisfaction of its obligations
under the Stockholder Agreements from the proceeds of life insurance
policies received by the Company or any Restricted Subsidiary; or
(xi) so long as the Company remains a Subchapter S corporation
under the Internal Revenue Code, the payment of dividends or the making of
loans or advances to the Holders of the Company's Capital Stock in an
amount equal to the Tax Amount (the "Permitted Tax Payments").
In computing the amount of Restricted Payments previously made for
purposes of clause (C) of the preceding paragraph, amounts described under the
immediately preceding clauses (i), (vi) and (vii) shall be included.
Section 10.13. Limitation on Transactions with Affiliates.
------------------------------------------
The Company shall not, and shall not cause or permit any of the
Restricted Subsidiaries, directly or indirectly, to, conduct any business or
enter into or suffer to exist any transaction or series of related transactions
with, or for the benefit of, any of their respective Affiliates (other than a
Restricted Subsidiary so long as no Affiliate of the Company or any beneficial
holder of 5% or more of any class or series of Capital Stock of the Company
shall beneficially own any Capital Stock in such Restricted Subsidiary) or any
beneficial holder of 10% or more of any class of Capital Stock of the Company or
any officer or director of the Company or any Restricted Subsidiary (each, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to the Company or the Restricted Subsidiary, as the case
may be, than those which could have been obtained in a comparable transaction at
such time from Persons who do not have such a relationship, (ii) with respect to
any Affiliate Transaction or series of Affiliate Transactions involving
aggregate payments or value equal to or greater than $2.0 million, the Company
shall have delivered an officers' certificate to the Trustee certifying that
such Affiliate Transaction or series of Affiliate Transactions has been approved
by a majority of the Board of Directors of the Company, including a majority of
the disinterested directors, if any, of the Board of Directors of the Company,
and (iii) with respect to any Affiliate Transaction or series of Affiliate
Transactions involving aggregate payments or value equal to or greater than $5.0
million (or greater than $2.0 million in the event there are no disinterested
directors), the Company shall have obtained a written opinion from an
Independent Financial Advisor stating that the terms of such Affiliate
Transaction or series of Affiliate Transactions are fair, from a financial point
of view, to the Company or the Restricted Subsidiary involved, as the case may
be.
Notwithstanding the foregoing, the restrictions set forth in this
Section 10.13 shall not apply to (i) transactions with or among the Company and
the Restricted Subsidiaries; (ii) directors' fees, indemnification and similar
arrangements, consulting fees, employee salaries, bonuses or employment
agreements, compensation or employee benefit arrangements and incentive
arrangements with any officer, director or employee of the Company or any
Restricted Subsidiary entered into in the ordinary course of business (including
customary benefits thereunder) and payments under any indemnification
arrangements permitted by applicable
<PAGE>
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law; (iii) the issue and sale by the Company to its stockholders of Capital
Stock (other than Redeemable Capital Stock); (iv) any dividends made in
compliance with the provisions described in Section 10.12; (v) loans and
advances to officers, directors and employees of the Company or any Restricted
Subsidiary for travel, entertainment, moving and other relocation expenses, in
each case made in the ordinary course of business, and other loans or advances
to officers, directors and employees of the Company or any Restricted Subsidiary
in an aggregate amount not in excess of $2.5 million in any fiscal year; and
(vi) the incurrence of intercompany Indebtedness permitted pursuant to clause
(v) of Section 10.11(b).
Section 10.14. Disposition of Proceeds of Asset Sales.
--------------------------------------
The Company shall not, and shall not cause or permit any Restricted
Subsidiary, directly or indirectly, to, make any Asset Sale, unless (i) the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets sold or otherwise disposed of and (ii) at least 75% of such
consideration consists of (A) cash or Cash Equivalents, (B) properties and
capital assets to be used in the same line of business being conducted by the
Company or any Restricted Subsidiary at such time or (C) Capital Stock in any
Person which thereby becomes a Restricted Subsidiary whose assets consist
primarily of properties and capital assets used in the same line of business
being conducted by the Company or any Restricted Subsidiary at such time. The
amount of any (i) Indebtedness (other than any Subordinated Indebtedness) of the
Company or any Restricted Subsidiary actually assumed by the transferee in such
Asset Sale and from which the Company and the Restricted Subsidiaries are fully
released and (ii) notes or other similar obligations received by the Company or
the Restricted Subsidiaries from such transferee that are immediately converted,
sold or exchanged (or are converted, sold or exchanged within thirty days of the
related Asset Sale) by the Company or the Restricted Subsidiaries into cash, in
an amount equal to the net cash proceeds realized upon such conversion, sale or
exchange, shall be deemed to be cash for purposes of determining the percentage
of cash or Cash Equivalent consideration received by the Company or the
Restricted Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be,
may (i) apply the Net Cash Proceeds of any Asset Sale within 365 days of receipt
thereof to permanently repay Senior Indebtedness or Indebtedness (for purposes
of this clause, a repayment of any amount owing under a revolving credit
facility shall be deemed a permanent repayment to the extent the amount
represented by such repayment is not drawn upon by the Company for a period of
six months after such repayment) of any Restricted Subsidiary that is not
subordinated in right of payment to any Indebtedness of such Restricted
Subsidiary, provided no such repayment shall affect the amount permitted under
clause (i) of Section 10.11(b) or (ii) commit in writing within 365 days after
the receipt thereof to acquire, construct or improve properties and capital
assets to be used in the same line of business as being conducted by the Company
or any Restricted Subsidiary at such time and so apply such Net Cash Proceeds
within 365 days after the receipt thereof.
To the extent all or part of the Net Cash Proceeds of any Asset
Sale are not applied (or, in the case of clause (ii) of the immediately
preceding paragraph, committed to be so applied in writing) within 365 days of
such Asset Sale as described in clause (i) or (ii) of the immediately preceding
paragraph (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"), the
Company shall, within 20 business days after such 365th day, make an offer to
purchase (the "Asset Sale Offer") to all Holders of outstanding Notes up to a
maximum principal amount (expressed as a multiple of $1,000) of Notes equal to
such Unutilized Net Cash Proceeds, at a purchase price in cash equal to 100% of
the principal amount thereof, plus accrued and unpaid interest thereon, if any,
to the date of such purchase; provided, however, that the Asset Sale Offer shall
not be required to be made until there are aggregate Unutilized Net Cash
Proceeds equal to or in excess of $7.5 million, at which time the entire amount
of such Unutilized Net Cash Proceds, and not just the amount in excess
<PAGE>
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of $7.5 million, shall be applied as required pursuant to this paragraph. An
Asset Sale Offer will be required to be kept open for a period of at least 20
business days after commencement thereof.
Notice of an Asset Sale Offer shall be prepared and mailed by the
Company with a copy to the Trustee not later than the 20th business day after
the Company is obligated to make an Asset Sale Offer (in accordance with the
immediately preceding paragraph) to each Holder at such Holder's registered
address, stating:
(i) that the Company is offering to purchase the maximum principal
amount of Notes that may be purchased out of the Unutilized Net Cash
Proceeds to the extent to be applied to an offer to purchase Notes (as
provided in the immediately preceding paragraph), at an offer price in cash
in an amount equal to 100% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of the purchase (the "Asset Sale
Offer Purchase Date"), which shall be a Business Day, specified in such
notice, that is not earlier than 20 days or later than 60 days from the
date such notice is mailed;
(ii) the amount of accrued and unpaid interest, if any, as of
the Asset Sale Offer Purchase Date;
(iii) that any Note not tendered will continue to accrue interest in
accordance with the terms thereof;
(iv) that, unless the Company defaults in the payment of the
purchase price for the Notes payable pursuant to the Asset Sale Offer, any
Notes accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest after the Asset Sale Offer Purchase Date;
(v) that Holders electing to have Notes purchased pursuant to
an Asset Sale Offer will be required to surrender their Notes to the Paying
Agent at the address specified in the notice prior to 5:00 p.m., New York
City time, on the third Business Day prior to the Asset Sale Purchase Date
with the "Option of Holder to Elect Purchase" on the reverse thereof
completed and must complete any form letter of transmittal proposed by the
Company (which letter must be completed correctly by such Holder) and which
is acceptable to the Trustee and the Paying Agent;
(vi) that Holders of Notes will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the third Business Day prior to the Asset Sale Offer Purchase
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes the Holder delivered for
purchase, the Note certificate number (if any) and a statement that such
Holder is withdrawing its election to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in part will be
issued Notes equal in principal amount to the unpurchased portion of the
Notes surrendered;
(viii) the instructions that Holders must follow in order to tender
their Notes; and
(ix) information concerning the business of the Company, the most
recent annual and quarterly reports of the Company filed with the SEC
pursuant to the Exchange Act (or, if the Company is not then required to
file any such reports with the SEC, the comparable reports prepared
pur-
<PAGE>
-64-
suant to Section 10.09), a description of material developments in the
Company's business, information with respect to pro forma historical
financial information after giving effect to such Asset Sale and such other
information concerning the circumstances and relevant facts regarding such
Asset Sale and Asset Sale Offer as would be material to a Holder of Notes
in connection with the decision of such Holder as to whether or not it
should tender Notes pursuant to the Asset Sale Offer.
With respect to any Asset Sale Offer effected pursuant to this Section
10.14, to the extent the aggregate principal amount of Notes tendered pursuant
to such Asset Sale Offer exceeds the Unutilized Net Cash Proceeds to be applied
to the repurchase thereof, such Notes shall be purchased pro rata based on the
aggregate principal amount of such Notes tendered by each Holder. To the extent
the Unutilized Net Cash Proceeds exceed the aggregate amount of Notes tendered
by the Holders pursuant to such Asset Sale Offer, the Company may retain and
utilize any portion of the Unutilized Net Cash Proceeds not applied to
repurchase the Notes for any purpose consistent with the other terms of this
Indenture.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act, and any other applicable
securities laws or regulations and any applicable requirements of any securities
exchange on which the Notes are listed, and any violation of the provisions of
this Indenture relating to such Asset Sale Offer occurring as a result of such
compliance shall not be deemed a Default.
Section 10.15. Change of Control.
-----------------
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall be
obligated, not more than 40 or less than 20 business days after the Change of
Control Date, to make an offer to purchase (a "Change of Control Offer") all
of the then Outstanding Notes at a purchase price (the "Change of Control
Purchase Price") in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the purchase date. The Company
will be required to purchase all Notes properly tendered into the Change of
Control Offer and not withdrawn.
In order to effect such Change of Control Offer, the Company shall,
not later than the 40th business day after the Change of Control Date, be
obligated to mail to each Holder of Notes notice of the Change of Control Offer,
which notice will govern the terms of the Change of Control Offer. The Change
of Control Offer will be required to be kept open for a period of at least 20
business days. The notice of the Change of Control Offer shall state:
(a) that the Change of Control has occurred and that such Holder has
the right to require the Company to purchase all or a portion (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes at a
purchase price in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase,
which shall be a Business Day, specified in such notice, that is not more
than 40 or less than 20 business days after the Change of Control Date (the
"Change of Control Purchase Date");
(b) the amount of accrued and unpaid interest, if any, as of the
Change Control Purchase Date;
(c) that any Note not tendered for payment will continue to accrue
interest in accordance with the terms thereof;
<PAGE>
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(d) that, unless the Company defaults in the payment of the purchase
price for the Notes payable pursuant to the Change of Control Offer, any
Notes accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Purchase Date;
(e) that Holders electing to have Notes purchased pursuant to a
Change of Control Offer will be required to surrender their Notes to the
Paying Agent at the address specified in the notice prior to 5:00 p.m., New
York City time, on the third Business Day prior to the Change of Control
Purchase Date with the "Option of Holder to Elect Purchase" on the reverse
thereof completed and must complete any form letter of transmittal proposed
by the Company and be completed correctly by such Holder and be acceptable
to the Trustee and the Paying Agent;
(f) that Holders of Notes will be entitled to withdraw their election
if the Paying Agent receives, not later than 5:00 p.m., New York City time,
on the third Business Day prior to the Change of Control Purchase Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of Notes the Holder delivered for
purchase, the Note certificate number (if any) and a statement that such
Holder is withdrawing its election to have such Notes purchased;
(g) that Holders whose Notes are purchased only in part will be
issued Notes equal in principal amount to the unpurchased portion of the
Notes surrendered; and
(h) the instructions that Holders must follow in order to tender
their Notes.
On the Change of Control Purchase Date, the Company will (i) accept
for payment all Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent an amount in cash equal to the
aggregate purchase price of all Notes or portions thereof accepted for payment,
plus any accrued and unpaid interest on such Notes as of the Change of Control
Purchase Date, and (iii) deliver or cause to be delivered to the Trustee all
Notes tendered pursuant to the Change of Control Offer. The Paying Agent shall
as promptly as practicable after the Change of Control Purchase Date mail to
each Holder of Notes or portions thereof accepted for payment an amount in cash
equal to the purchase price for such Notes, plus any accrued and unpaid interest
thereon, and the Trustee shall promptly authenticate and mail to such Holders of
Notes accepted for payment in part a new Note equal in principal amount to any
unpurchased portion of the Note surrendered. Any Notes not so accepted in whole
or in part shall be promptly returned to the Holder thereof.
On and after a Change of Control Purchase Date, interest will cease to
accrue on the Notes or portions thereof accepted for payment unless the Company
defaults in the payment of the purchase price therefor. The Company will
publicly announce the results of the Change of Control Offer as soon as
practicable after the Change of Control Purchase Date.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act, and any other applicable
securities laws or regulations and any applicable requirements of any securities
exchange on which the Notes are listed, in connection with the repurchase of
Notes pursuant to a Change of Control Offer, and any violation of the provisions
of this Indenture relating to such Change of Control Offer occurring as a result
of such compliance shall not be deemed a Default.
<PAGE>
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Section 10.16. Limitation on Liens.
-------------------
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, create, incur, assume or suffer to exist any Lien of any kind,
upon any of its property or assets, whether now owned or acquired after the
Issue Date, or any proceeds therefrom, which secure either (i) Subordinated
Indebtedness unless the Notes, in the case of the Company, and the Note
Guarantees, if any, are secured by a Lien on such property, assets or proceeds
senior in priority to the Liens securing such Subordinated Indebtedness or (ii)
Pari Passu Indebtedness unless the Notes, in the case of the Company, and the
Note Guarantees, are equally and ratably secured with the Liens securing such
Pari Passu Indebtedness.
Section 10.17. Limitation on Dividends and Other Payment
-----------------------------------------
Restrictions Affecting Restricted Subsidiaries.
- ----------------------------------------------
The Company shall not, and shall not cause or permit any Restricted
Subsidiary, directly or indirectly, to create or otherwise cause or suffer to
exist, or enter into any agreement with any Person that would cause to become
effective, any consensual encumbrance or restriction of any kind, on the ability
of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make
any other distribution on or in respect of its Capital Stock or any other
interest or participation in, or measured by, its profits, to the Company or any
other Restricted Subsidiary, (b) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (c) make loans or advances to, or guarantee any
Indebtedness or other obligations of, the Company or any other Restricted
Subsidiary or (d) transfer any of its property or assets to the Company or any
other Restricted Subsidiary, except (i) any encumbrance or restriction existing
under the security documentation for the New Credit Agreement as in effect on
the Issue Date relating to assets subject to a Lien created thereby, and with
respect to a Restricted Subsidiary that is not a Restricted Subsidiary on the
Issue Date, existing at the time such Person becomes a Restricted Subsidiary
(but not created in contemplation thereof); provided, however, that such
encumbrances and restrictions are not applicable to the Company or any
Restricted Subsidiary, or the properties or assets of the Company or any
Restricted Subsidiary; (ii) customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices; (iii) Purchase Money Indebtedness for property acquired in the
ordinary course of business that only imposes encumbrances and restrictions on
the property so acquired; (iv) any agreement for the sale or disposition of the
Capital Stock or assets of any Restricted Subsidiary; provided, however, that
such encumbrances and restrictions described in this clause (iv) are only
applicable to such Restricted Subsidiary or assets, as applicable, and any such
sale or disposition is made in compliance with Section 10.14 to the extent
applicable thereto; and (v) any encumbrance or restriction existing under any
agreement that refinances or replaces the agreements containing the encumbrance
or restrictions in the foregoing clauses (i) through (iv); provided, however,
that the terms and conditions of any such restrictions permitted under this
clause (v) are not materially less favorable to the Holders of the Notes than
those under or pursuant to the agreement evidencing the Indebtedness refinanced.
Section 10.18. Restrictions on Preferred Stock of Restricted
---------------------------------------------
Subsidiaries.
- ------------
The Company shall not sell, and shall not cause or permit any of the
Restricted Subsidiaries to issue, any Preferred Stock of any Restricted
Subsidiary (other than to the Company or to a Wholly-Owned Restricted
Subsidiary) or permit any Person (other than the Company or a Wholly-Owned
Restricted Subsidiary) to own any Preferred Stock of any Restricted Subsidiary.
<PAGE>
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Section 10.19. Limitation on Designations of Unrestricted
------------------------------------------
Subsidiaries.
- ------------
The Company may designate after the Issue Date any Subsidiary (other
than a Guarantor) as an "Unrestricted Subsidiary" under this Indenture (a
"Designation") only if:
(i) no Default shall have occurred and be continuing at the time
of or after giving effect to such Designation;
(ii) the Company would be permitted to make an Investment at the
time of Designation (assuming the effectiveness of such Designation) in an
amount (the "Designation Amount") equal to the Fair Market Value of the
Company's interest in such Subsidiary on such date; and
(iii) the Company would be permitted under this Indenture to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 10.11 at the time of such Designation (assuming the
effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
10.12 for all purposes of this Indenture in the Designation Amount.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
(i) no Default shall have occurred and be continuing at the time
of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of this
Indenture.
All Designations and Revocations must be evidenced by Board
Resolutions of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
Section 10.20. Limitation on Other Senior Subordinated Indebtedness.
----------------------------------------------------
Neither the Company nor any Guarantor shall create, incur, assume,
guarantee or in any other manner become liable with respect to any Indebtedness
(other than the Notes and the Note Guarantees) subordinate in right of payment
to any Indebtedness of the Company or of such Guarantor, as the case may be,
unless such Indebtedness is either (i) pari passu in right of payment with the
Notes or such Note Guarantee, as the case may be, or (ii) subordinate in right
of payment to the Notes or such Note Guarantee, as the case may be, in the same
manner and at least to the same extent as the Notes are subordinated to Senior
Indebtedness or as such Note Guarantee is subordinated to Guarantor Senior
Indebtedness, as the case may be.
<PAGE>
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ARTICLE ELEVEN
REDEMPTION OF NOTES
Section 11.01. Optional and Special Redemption.
-------------------------------
Optional Redemption. The Notes will be redeemable at the option of
-------------------
the Company, in whole or in part, at any time on or after November 1, 2002, at
the redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest thereon, if any, to the date of
redemption, if redeemed during the 12-month period beginning on November 1 of
the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2002..................................... 105.188%
2003..................................... 103.458%
2004..................................... 101.729%
2005 and thereafter...................... 100.000%
</TABLE>
Optional Redemption upon Equity Offering. On or prior to November 1,
----------------------------------------
2000, the Company may, at its option, use the net proceeds of an Equity Offering
to redeem up to 35% of the originally issued aggregate principal amount of the
Notes, at a redemption price in cash equal to 110 1/4% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided, however, that not less than $65.0 million in aggregate
principal amount of Notes is outstanding following such redemption. Notice of
any such redemption must be given not later than 60 days after the consummation
of the Equity Offering.
As used in the preceding paragraph, an "Equity Offering" means any
public or private sale of equity securities (other than Redeemable Capital
Stock) of the Company; provided, however, that the proceeds (net of any
underwriting discounts or commissions) to the Company from any such private sale
of equity securities shall be at least $20.0 million.
Section 11.02. Applicability of Article.
------------------------
Redemption of Notes at the election of the Company as permitted or
required by any provision of this Indenture, shall be made in accordance with
such provision and this Article.
Section 11.03. Election To Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Notes pursuant to Section
11.01(a) shall be evidenced by a Board Resolution of the Company and an
Officers' Certificate. In case of any redemption at the election of the
Company, the Company shall, at least 60 days prior to the Redemption Date fixed
by the Company (unless a shorter notice period shall be satisfactory to the
Trustee), notify the Trustee in writing of such Redemption Date and of the
principal amount of Notes to be redeemed.
<PAGE>
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Section 11.04. Selection of Notes To Be Redeemed.
---------------------------------
In the event that less than all of the Notes are to be redeemed at any
time, selection of Notes for redemption shall be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not listed on a
national securities exchange, on a pro rata basis, by lot or by such other
method as the Trustee deems fair and appropriate; provided, however, that no
Notes of a principal amount of $1,000 or less shall be redeemed in part;
provided, further, however, that any such redemption made with the net proceeds
of an Equity Offering shall be made on a pro rata basis or on as nearly a pro
rata basis as practicable (subject to the procedures of the Depositary). Notice
of redemption will be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note will state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption so long
as the Company has deposited with the paying agent for the Notes funds in
satisfaction of the applicable redemption price pursuant to this Indenture.
Section 11.05. Notice of Redemption.
--------------------
Notice of any optional or mandatory redemption shall be mailed by
first-class mail, postage prepaid, mailed at least 30 but not more than 60 days
before the Redemption Date, to each Holder of Notes to be redeemed at its
registered address.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if fewer than all outstanding Notes are to be redeemed, the
identification of the particular Notes to be redeemed;
(d) in the case of a Note to be redeemed in part, the principal
amount of such Note to be redeemed and that after the Redemption Date upon
surrender of such Note, a new Note or Notes in the aggregate principal
amount equal to the unredeemed portion thereof will be issued;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become due
and payable upon each such Note or portion thereof, and that (unless the
Company shall default in payment of the Redemption Price) interest thereon
shall cease to accrue on and after said date;
(g) the place or places where such Notes are to be surrendered for
payment of the Redemption Price;
(h) the CUSIP number, if any, relating to such Notes; and
<PAGE>
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(i) the paragraph of the Notes pursuant to which the Notes are being
redeemed.
Notice of redemption of Notes to be redeemed shall be given by the
Company or, at the Company's written request, by the Trustee in the name and at
the expense of the Company.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Note designated for redemption as a whole or in
part shall not affect the validity of the proceedings for the redemption of any
other Note.
Section 11.06. Deposit of Redemption Price.
---------------------------
On or prior to 10:00 a.m., New York City time, on each Redemption
Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.03) an amount of money in same day funds sufficient to
pay the Redemption Price of, and accrued interest on, all the Notes or portions
thereof which are to be redeemed on that date.
Section 11.07. Notes Payable on Redemption Date.
--------------------------------
Notice of redemption having been given as aforesaid, the Notes so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price) such Notes shall
cease to bear interest. Upon surrender of any such Note for redemption in
accordance with said notice, such Note shall be paid by the Company at the
Redemption Price; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Notes, or one or more predecessor Notes, registered as such on the
relevant Regular Record Dates according to the terms and the provisions of
Section 3.06.
On and after any Redemption Date, if money sufficient to pay the
Redemption Price of and accrued interest on Notes called for redemption shall
have been made available in accordance with Section 11.06, the Notes called for
redemption will cease to accrue interest and the only right of the Holders of
such Notes will be to receive payment of the Redemption Price of and subject to
the provision in the preceding paragraph, accrued and unpaid interest on such
Notes to the Redemption Date. If any Note called for redemption shall not be so
paid upon surrender thereof for redemption, the principal and premium, if any,
shall, until paid, bear interest from the Redemption Date at the rate then borne
by such Note.
Section 11.08. Notes Redeemed or Purchased in Part.
-----------------------------------
Any Note which is to be redeemed or purchased only in part shall be
surrendered to the Paying Agent at the office or agency maintained for such
purpose pursuant to Section 10.02 (with, if the Company, the Note Registrar or
the Trustee so requires, due endorsement by, or a written instrument of transfer
in form satisfactory to, the Company, the Note Registrar or the Trustee duly
executed by the Holder thereof or such Holder's attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a new Note or Notes,
of any authorized denomination as requested by such Holder in aggregate
principal amount equal to, and in exchange for, the portion of the principal of
the Note so surrendered that is not redeemed or purchased.
<PAGE>
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ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall be discharged and cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of Notes
herein expressly provided for) as to all outstanding Notes, and the Trustee, on
written demand of and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when
(a) either
(i) all the Notes theretofor authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or
paid and Notes for whose payment money has theretofor been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust) have been
delivered to the Trustee for cancellation or
(ii) all Notes not theretofor delivered to the Trustee for
cancellation have become due and payable and the Company or any
Guarantor has irrevocably deposited or caused to be deposited with the
Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes not theretofor delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest on the
Notes to the date of deposit together with irrevocable instructions
from the Company directing the Trustee to apply such funds to the
payment thereof at maturity or redemption, as the case may be;
(b) the Company or any Guarantor has paid all other sums payable
under this Indenture by the Company and the Guarantors; and
(c) the Company and each of the Guarantors have delivered to the
Trustee an officers' certificate and an opinion of counsel each stating
that all conditions precedent under this Indenture relating to the
satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07 and, if money shall
have been deposited with the Trustee pursuant to subclause (a)(ii) of this
Section 12.01 the obligations of the Trustee under Section 12.02, shall survive.
Section 12.02. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 10.03, all
money deposited with the Trustee pursuant to Section 12.01 shall be held in
trust and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal of, premium, if
any, and interest on the Notes for whose payment such money has been deposited
with the Trustee.
<PAGE>
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ARTICLE THIRTEEN
GUARANTEE OF NOTES
Section 13.01. Guarantee.
---------
Subject to the provisions of this Article Thirteen, each Guarantor, if
any, hereby jointly and severally and fully and unconditionally guarantees to
each Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of (i) the validity and
enforceability of this Indenture, the Notes or the obligations of the Company or
any other Guarantors to the Holders or the Trustee hereunder or thereunder or
(ii) the absence of any action to enforce the same or any other circumstances
which might otherwise constitute a legal or equitable discharge or default of a
Guarantor, that: (a) the principal of, premium, if any, and interest on the
Notes will be duly and punctually paid in full when due, whether at maturity, by
acceleration or otherwise, and interest on the overdue principal and (to the
extent permitted by law) interest, if any, on the Notes and all other
obligations of the Company or the Guarantors to the Holders or the Trustee
hereunder or thereunder (including fees, expenses or other) and all other
Obligations on the Notes will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (b) in case of any extension
of time of payment or renewal of any Notes or any of such other Obligations with
respect to the Notes, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
Stated Maturity, by acceleration or otherwise. Failing payment when due of any
amount so guaranteed, or failing performance of any other obligation of the
Company to the Holders, for whatever reason, each Guarantor will be obligated to
pay, or to perform or cause the performance of, the same immediately. An Event
of Default under this Indenture or the Notes shall constitute an event of
default under this Guarantee, and shall entitle the Holders to accelerate the
obligations of the Guarantors hereunder in the same manner and to the same
extent as the obligations of the Company.
Each of the Guarantors, if any, hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, any release of any other Guarantor, the
recovery of any judgment against the Company, any action to enforce the same,
whether or not a Guarantee is affixed to any particular Note, or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each of the Guarantors hereby waives the benefit of
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that its Guarantee will not be discharged except by complete
performance of the obligations contained in the Notes, this Indenture and this
Guarantee. If any Holder or the Trustee is required by any court or otherwise
to return to the Company or to any Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to the Company or such
Guarantor, any amount paid by the Company or such Guarantor to the Trustee or
such Holder, this Guarantee, to the extent theretofor discharged, shall be
reinstated in full force and effect. Each Guarantor further agrees that, as
between it, on the one hand, and the Holders of Notes and the Trustee, on the
other hand, (a) subject to this Article Thirteen, the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Five
hereof for the purposes of this Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (b) in the event of any acceleration of such obligations
as provided in Article Five hereof, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Guarantors for the
purpose of this Guarantee.
<PAGE>
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This Guarantee shall remain in full force and effect and continue to
be effective should any petition be filed by or against the Company for
liquidation or reorganization, should the Company become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Company's assets, and shall, to
the fullest extent permitted by law, continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Notes are,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee on the Notes, whether as a "voidable
preference," "fraudulent transfer" or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Notes shall, to the
fullest extent permitted by law, be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
No stockholder, officer, director, employer or incorporator, past,
present or future, or any Guarantor, as such, shall have any personal liability
under this Guarantee by reason of his, her or its status as such stockholder,
officer, director, employer or incorporator.
The Guarantors shall have the right to seek contribution from any non-
paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under this Guarantee.
Notwithstanding any of the foregoing, each Guarantor's liability under
this Section 13.01 shall be limited to the maximum amount that would not result
in such Guarantor's Guarantee under this Section 13.01 constituting a fraudulent
conveyance or fraudulent transfer under applicable law.
Section 13.02. Execution and Delivery of Guarantee.
-----------------------------------
To further evidence the Guarantee set forth in Section 13.01, each
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form included in Exhibit E hereto, shall be endorsed on each Note authenticated
and delivered by the Trustee after such Guarantee is executed and executed by
either manual or facsimile signature of an Officer of each Guarantor. The
validity and enforceability of any Guarantee shall not be affected by the fact
that it is not affixed to any particular Note.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 13.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture or a
Note no longer holds that office at the time the Trustee authenticates such Note
or at any time thereafter, such Guarantor's Guarantee of such Note shall be
valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Guarantor.
Section 13.03. Additional Guarantors.
---------------------
Any person who was not a Guarantor at the time this Indenture was
executed may become a Guarantor by executing and delivering to the Trustee (a) a
supplemental indenture in form and substance satisfactory to the Trustee, which
subjects such person to the provisions of this Indenture as a Guarantor, and (b)
an Opinion of Counsel to the effect that such supplemental indenture has been
duly authorized and executed by such person and constitutes the legal, valid,
binding and enforceable obligation of such person (subject to
<PAGE>
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such customary exceptions concerning fraudulent conveyance laws, creditors'
rights and equitable principles as may be acceptable to the Trustee in its
discretion).
Section 13.04. Guarantee Obligations Subordinated to Guarantor
-----------------------------------------------
Senior Indebtedness.
- -------------------
Each Guarantor covenants and agrees, and each Holder of a Note, by its
acceptance thereof, likewise covenants and agrees, that all payments pursuant to
the Guarantee made by or on behalf of such Guarantor are hereby expressly made
subordinate and subject in right of payment as provided in this Article Thirteen
to the prior payment in full in cash of all amounts payable under all existing
and future Guarantor Senior Indebtedness of such Guarantor including such
Guarantor's guarantees of the Company's Obligations under the New Credit
Agreement.
This Section 13.04 and the following Sections 13.05 through 13.17 of
this Article Thirteen shall constitute a continuing offer to all persons who, in
reliance upon such provisions, become Holders of, or continue to hold Guarantor
Senior Indebtedness of any Guarantor and, to the extent set forth in Section
13.06(b), Holders of Designated Senior Indebtedness; and such provisions are
made for the benefit of the Holders of Guarantor Senior Indebtedness of each
Guarantor and, to the extent set forth in Section 13.06(b), Holders of
Designated Senior Indebtedness; and such Holders (to such extent) are made
obligees hereunder and they or each of them may enforce such provisions.
Section 13.05. Payment Over of Proceeds upon Dissolution, etc., of a
-----------------------------------------------------
Guarantor.
- ---------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to any Guarantor or to its
creditors, as such, or to its assets or (b) any liquidation, dissolution or
other winding-up of any Guarantor, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the benefit
of creditors or any other marshalling of assets or liabilities of any Guarantor,
then and in any such event:
(1) the holders of all Guarantor Senior Indebtedness of such
Guarantor shall be entitled to receive payment in full in cash or, as
acceptable to the holders of such Guarantor Senior Indebtedness, in any
other manner of all amounts due on or in respect of all such Guarantor
Senior Indebtedness (including, in the case of Obligations under the New
Credit Agreement, and related Currency and Interest Rate Agreement
Obligations of such Guarantor, any interest accruing subsequent to the
filing of a petition for bankruptcy at the rate provided for in the
documentation governing such Obligations under the New Credit Agreement,
and Interest Rate Agreement Obligations of such Guarantor, as the case may
be, whether or not such interest is an allowed claim under applicable law),
or provision shall be made for such payment, before the Holders of the
Notes are entitled to receive, pursuant to this Guarantee, any payment or
distribution of any kind or character by or on behalf of such Guarantor on
account of the Guarantor's Obligations under the Notes; and
(2) any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities, by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the subordination provisions of this Article Thirteen shall be paid by the
liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the Holders of Guarantor Senior
Indebtedness of such Guarantor or their representative or representatives
or to the trustee or trustees under any indenture under which any
instruments evidencing any of such Guarantor Senior Indebted-
<PAGE>
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ness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of such Guarantor Senior Indebtedness held or
represented by each, to the extent necessary to make payment in full in
cash of all such Guarantor Senior Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution to the Holders of
such Guarantor Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section 13.05, the Trustee or the Holder of any Note shall have
received any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities, in respect of
any Obligations of such Guarantor under this Guarantee before all Guarantor
Senior Indebtedness of such Guarantor is paid in full in cash or payment
thereof provided for, then and in such event such payment or distribution
shall be paid over or delivered forthwith to the Senior Representative for
application to the payment of all such Guarantor Senior Indebtedness
remaining unpaid, to the extent necessary to pay all of such Guarantor
Senior Indebtedness in full in cash, after giving effect to any concurrent
payment or distribution to or for the Holders of such Guarantor Senior
Indebtedness. Any such payment or distribution of assets received by the
Trustee, which is required to be paid over to the Senior Representative,
will be held in trust by the Trustee for the benefit of the Holders of the
Guarantor Senior Indebtedness.
Section 13.06. Suspension of Guarantee Obligations When Guarantor
--------------------------------------------------
Senior Indebtedness in Default.
- ------------------------------
(a) Unless Section 13.05 shall be applicable, after the occurrence of
a Payment Default with respect to any Guarantor Senior Indebtedness no payment
or distribution of any assets of such Guarantor of any kind or character shall
be made by or on behalf of such Guarantor on account of the Guarantor's
Obligations pursuant to the Notes or on account of the purchase, redemption,
defeasance or other acquisition of the Obligations pursuant to the Notes or on
account of any other Obligations of such Guarantor under this Guarantee unless
and until such Payment Default shall have been cured or waived or shall have
ceased to exist or the Guarantor Senior Indebtedness as to which such Payment
Default relates shall have been discharged or paid in full in cash, after which,
subject to Section 13.05 (if applicable), such Guarantor shall resume making any
and all required payments in respect of its Obligations under this Guarantee.
(b) Unless Section 13.05 shall be applicable, during any Payment
Blockage Period with respect to any Guarantor Senior Indebtedness, no payment or
distribution of any assets of a Guarantor of any kind or character shall be made
by or on behalf of a Guarantor on account of the Guarantor's Obligations on the
Notes or on account of the purchase, redemption, defeasance or other acquisition
of the Guarantor's Obligations on the Notes or on account of any of the other
Obligations of such Guarantor under this Guarantee; provided that the foregoing
prohibition shall not apply unless such Payment Blockage Period has been
instituted under Section 14.03(b) by a Senior Representative acting for Holders
of Designated Senior Indebtedness which also constitutes Guarantor Senior
Indebtedness. Upon the termination of any Payment Blockage Period, subject to
Section 13.05 (if applicable), such Guarantor shall resume making any and all
required payments in respect of its Obligations under this Guarantee.
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Note shall have received any payment from a Guarantor
prohibited by the foregoing provisions of this Section 13.06, then and in such
event such payment shall be paid over and delivered forthwith to the Senior
Representative initiating the Payment Blockage Period, in trust for distribution
to the Holders of Guarantor Senior
<PAGE>
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Indebtedness or, if no amounts are then due in respect of Guarantor Senior
Indebtedness, prompt return to the Guarantor, or as a court of competent
jurisdiction shall direct.
Section 13.07. Release of a Guarantor.
----------------------
(a) So long as no Event of Default shall have occurred and be
continuing upon the sale or disposition (whether by merger, stock purchase,
asset sale or otherwise) of a Guarantor (or all or substantially all of the
assets of any such Guarantor or 50% or more of the Capital Stock of any such
Guarantor) to an entity which is not a Subsidiary of the Company, which
transaction is otherwise in compliance with this Indenture, such Guarantor shall
be deemed released from all its Obligations under its Guarantee of the Notes;
provided, however, that any such termination shall occur only to the extent that
all Obligations of such Guarantor under all its Guarantees of, and under all of
its pledges of assets or other security interests which secure, any Indebtedness
of the Company shall also terminate upon such release, sale or transfer. Upon
the release of any Guarantor from its Guarantee pursuant to the provisions of
this Indenture, each other Guarantor not so released shall remain liable for the
full amount of principal of, and interest on, the Notes as and to the extent
provided in this Indenture.
(b) The Trustee shall deliver an appropriate instrument evidencing
the release of a Guarantor upon receipt of a request of the Company accompanied
by an Officers' Certificate certifying as to the compliance with this Section
13.07. Any Guarantor not so released or the entity surviving such Guarantor, as
applicable, will remain or be liable under its Guarantee as provided in this
Article Thirteen.
The Trustee shall execute any documents reasonably requested by the
Company or a Guarantor in order to evidence the release of such Guarantor from
its obligations under its Guarantee endorsed on the Notes and under this Article
Thirteen.
Except as set forth in Articles Eight and Ten and this Section 13.07,
nothing contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or another
Guarantor or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety to the Company or another
Guarantor.
Section 13.08. Waiver of Subrogation.
---------------------
Each Guarantor hereby irrevocably waives any claim or other rights
which it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Guarantor's obligations
under this Guarantee and this Indenture, including, without limitation, any
right of subrogation, reimbursement, exoneration, indemnification, and any right
to participate in any claim or remedy of any Holder of Notes against the
Company, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Company, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim or other rights. If any amount shall be paid to any Guarantor in
violation of the preceding sentence and the Notes shall not have been paid in
full, such amount shall have been deemed to have been paid to such Guarantor for
the benefit of, and held in trust for the benefit of, the Holders of the Notes,
and shall, subject to the subordination provisions of this Article Thirteen and
to Article Fourteen, forthwith be paid to the Trustee for the benefit of such
Holders to be credited and applied upon the Notes, whether matured or unmatured,
in accordance with the terms of this Indenture. Each Guarantor acknowledges that
it will receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
13.08 is knowingly made in contemplation of such benefits.
<PAGE>
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Section 13.09. Guarantee Subordination Provisions Solely To Define
---------------------------------------------------
Relative Rights.
- ---------------
The subordination provisions of this Article are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Notes on the one hand and the Holders of Guarantor Senior Indebtedness of each
Guarantor and, to the extent set forth in Section 13.06, Holders of Designated
Senior Indebtedness on the other hand. Nothing contained in this Article
Thirteen (other than a release pursuant to Section 13.07) or elsewhere in this
Indenture or in the Notes is intended to or shall (a) impair, as among each
Guarantor, its creditors other than Holders of its Guarantor Senior Indebtedness
and the Holders of the Notes, the obligation of such Guarantor, which is
absolute and unconditional, to make payments to the Holders in respect of its
obligations under this Guarantee as and when the same shall become due and
payable in accordance with their terms; or (b) affect the relative rights
against such Guarantor of the Holders of the Notes and creditors of such
Guarantor other than the Holders of the Guarantor Senior Indebtedness of such
Guarantor; or (c) prevent the Trustee or the Holder of any Note from exercising
all remedies otherwise permitted by applicable law upon Default or an Event of
Default under this Indenture, subject to the rights, if any, under the
subordination provisions of this Article Thirteen of the Holders of Guarantor
Senior Indebtedness of the Guarantors hereunder and, to the extent set forth in
Section 13.06, Holders of Designated Senior Indebtedness (1) in any case,
proceeding, dissolution, liquidation or other winding-up, assignment for the
benefit of creditors or other marshaling of assets and liabilities of the
Guarantor referred to in Section 13.05, to receive, pursuant to and in
accordance with such Section, cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder, or (2) under the conditions specified
in Section 13.06, to prevent any payment prohibited by such Section or enforce
their rights pursuant to Section 13.06(c).
The failure by any Guarantor to make a payment in respect of its
obligations under this Guarantee by reason of any provision of this Article
Thirteen shall not be construed as preventing the occurrence of a Default or an
Event of Default hereunder.
Section 13.10. Trustee To Effectuate Subordination of Guarantee
------------------------------------------------
Obligations.
- -----------
Each Holder of a Note by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article Thirteen and appoints
the Trustee his attorney-in-fact for any and all such purposes, including, in
the event of any dissolution, winding-up, liquidation or reorganization of any
Guarantor whether in bankruptcy, insolvency, receivership proceedings, or
otherwise, the timely filing of a claim for the unpaid balance of the
indebtedness of such Guarantor owing to such Holder in the form required in such
proceedings and the causing of such claim to be approved. If the Trustee does
not file such a claim prior to 30 days before the expiration of the time to file
such a claim, the Holders of Guarantor Senior Indebtedness, or any
representative, may file such a claim on behalf of Holders of the Notes.
Section 13.11. No Waiver of Guarantee Subordination Provisions.
-----------------------------------------------
(a) No right of any present or future Holder of any Guarantor Senior
Indebtedness of any Guarantor or Designated Senior Indebtedness to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or any
Guarantor or by any act or failure to act, in good faith, by any such Holder, or
by any non-compliance by the Company or any Guarantor with the terms, provisions
and covenants of this Indenture, regardless of any knowledge thereof any such
Holder may have or be otherwise charged with.
<PAGE>
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(b) Without limiting the generality of subsection (a) of this Section
13.11, the Holders of Guarantor Senior Indebtedness of any Guarantor may, at any
time and from time to time, without the consent of or notice to the Trustee or
the Holders of the Notes, without incurring responsibility to the Holders of the
Notes and without impairing or releasing the subordination provided in this
Article Thirteen or the obligations hereunder of the Holders of the Notes to the
Holders of such Guarantor Senior Indebtedness, do any one or more of the
following: (1) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, such Guarantor Senior Indebtedness or any
Senior Indebtedness as to which such Guarantor Senior Indebtedness relates or
any instrument evidencing the same or any agreement under which such Guarantor
Senior Indebtedness or such Senior Indebtedness is outstanding; (2) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Guarantor Senior Indebtedness or any Senior Indebtedness
as to which such Guarantor Senior Indebtedness relates; (3) release any person
liable in any manner for the collection or payment of such Guarantor Senior
Indebtedness or any Senior Indebtedness as to which such Guarantor Senior
Indebtedness relates; and (4) exercise or refrain from exercising any rights
against such Guarantor and any other person; provided that in no event shall any
such actions limit the right of the Holders of the Notes to take any action to
accelerate the maturity of the Notes pursuant to Article Five hereof or to
pursue any rights or remedies hereunder or under applicable laws if the taking
of such action does not otherwise violate the terms of this Indenture.
Section 13.12. Guarantors To Give Notice to Trustee.
------------------------------------
(a) The Company and each Guarantor shall give prompt written notice
to the Trustee of any fact known to such Guarantor which would prohibit the
making of any payment to or by the Trustee in respect of the Notes.
Notwithstanding the subordination provisions of this Article or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee in respect of the Notes, unless and until the Trustee shall have
received written notice thereof at its Corporate Trust Office from the Company,
such Guarantor or a Holder of its Guarantor Senior Indebtedness or from any
trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of this Section 13.12,
shall be entitled in all respects to assume that no such facts exist; provided
that if the Trustee shall not have received the notice provided for in this
Section 13.12 at least two Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose under this Indenture
(including, without limitation, the payment of the principal of or interest on
any Note), then, anything herein contained to the contrary notwithstanding but
without limiting the rights and remedies of the Holders of such Guarantor Senior
Indebtedness or any trustee, fiduciary or agent thereof, the Trustee shall have
full power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within two Business Days
prior to such date; nor shall the Trustee be charged with knowledge of the
curing of any such default or the elimination of the act or condition preventing
any such payment unless and until the Trustee shall have received an Officers'
Certificate from such Guarantor to such effect.
(b) Subject to the provisions of Section 6.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice to the Trustee, by a
person representing himself to be a Holder of Guarantor Senior Indebtedness of
any Guarantor (or a trustee, fiduciary or agent therefor). In the event that
the Trustee determines in good faith that further evidence is required with
respect to the right of any person as a Holder of Guarantor Senior Indebtedness
of any Guarantor to participate in any payment or distribution pursuant to this
Article Thirteen, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Guarantor Senior
Indebtedness of each Guarantor held by such person, the extent to which such
person is entitled to participate in such payment or distribution and any other
facts pertinent to
<PAGE>
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the rights of such person under this Article Thirteen, and if such evidence is
not furnished, the Trustee may defer any payment to such person pending judicial
determination as to the right of such person to receive such payment.
Section 13.13. Reliance on Judicial Order or Certificate of
--------------------------------------------
Liquidating Agent Regarding Dissolution, etc., of Guarantors.
- ------------------------------------------------------------
Upon any payment or distribution of assets of any Guarantor referred
to in this Article Thirteen, the Trustee, subject to the provisions of Section
6.01, and the Holders shall be entitled to rely upon any order or decree entered
by any court of competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution, winding-up or similar
case or proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other person making such payment or distribution, delivered to the
Trustee or to the Holders, for the purpose of ascertaining the persons entitled
to participate in such payment or distribution, the Holders of Guarantor Senior
Indebtedness of such Guarantor and other Indebtedness of such Guarantor, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Thirteen;
provided that the foregoing shall apply only if such court has been fully
apprised of the provisions of this Article Thirteen.
Section 13.14. Rights of Trustee as a Holder of Guarantor Senior
-------------------------------------------------
Indebtedness; Preservation of Trustee's Rights.
- ----------------------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Thirteen with respect to any Guarantor Senior
Indebtedness of any Guarantor which may at any time be held by the Trustee, to
the same extent as any other Holder of such Guarantor Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its rights as such
Holder. Nothing in this Article Thirteen shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 6.07.
Section 13.15. Article Thirteen Applicable to Paying Agents.
--------------------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article Thirteen shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article Thirteen in addition to or in place of the Trustee;
provided that Section 13.14 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
Section 13.16. No Suspension of Remedies Subject to Rights of
----------------------------------------------
Holders of Guarantor Senior Indebtedness.
- ----------------------------------------
Nothing contained in this Article Thirteen shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article Five or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article Thirteen of the Holders, from time to time, of Guarantor Senior
Indebtedness of the Guarantors.
<PAGE>
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Section 13.17. Trustee's Relation to Guarantor Senior Indebtedness.
---------------------------------------------------
With respect to the Holders of Guarantor Senior Indebtedness of any
Guarantor, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article Thirteen
(and in Article Fourteen with respect to Senior Indebtedness), and no implied
covenants or obligations with respect to the Holders of Guarantor Senior
Indebtedness of any Guarantor shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
Holders of Guarantor Senior Indebtedness of any Guarantor and the Trustee shall
not be liable to any Holder of Guarantor Senior Indebtedness of any Guarantor if
it shall mistakenly pay over or deliver to Holders, the Company or any other
person moneys or assets to which any Holder of Guarantor Senior Indebtedness of
any Guarantor shall be entitled by virtue of this Article Thirteen or otherwise.
Section 13.18. Subrogation.
-----------
Upon the payment in full in cash of all amounts payable under or in
respect of Guarantor Senior Indebtedness of the Guarantors and of all Senior
Indebtedness of the Company, the Holders shall be subrogated to the rights of
the Holders of such Guarantor Senior Indebtedness of the Guarantors to receive
payments or distributions of assets of any Guarantor made on such Guarantor
Senior Indebtedness of the Guarantors until all amounts due under the Guarantee
shall be paid in full; and for the purposes of such subrogation, no payments or
distributions to Holders of such Guarantor Senior Indebtedness of the Guarantors
of any cash, property or securities to which Holders of the Notes would be
entitled except for the provisions of this Article Thirteen, and no payment
pursuant to the provisions of this Article Thirteen to Holders of such Guarantor
Senior Indebtedness of the Guarantors by the Holders, shall, as between each
Guarantor, its creditors other than Holders of such Guarantor Senior
Indebtedness of the Guarantors and the Holders, be deemed to be a payment by
such Guarantor to or on account of such Guarantor Senior Indebtedness of the
Guarantors, its being understood that the provisions of this Article Thirteen
are solely for the purpose of defining the relative rights of the Holders of
such Guarantor Senior Indebtedness of the Guarantors, on the one hand, and the
Holders, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Thirteen shall have
been applied, pursuant to the provisions of this Article Thirteen, to the
payment of all amounts payable under the Guarantor Senior Indebtedness of the
Guarantors, then and in such case, the Holders shall be entitled to receive from
the Holders of such Guarantor Senior Indebtedness of the Guarantors at the time
outstanding any payments or distributions received by such Holders of Guarantor
Senior Indebtedness of the Guarantors in excess of the amount sufficient to pay
all amounts payable under or in respect of such Guarantor Senior Indebtedness of
the Guarantors in full.
ARTICLE FOURTEEN
SUBORDINATION OF NOTES
Section 14.01. Notes Subordinate to Senior Indebtedness.
----------------------------------------
The Company covenants and agrees, and each Holder of a Note, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article Fourteen, the Indebtedness
represented by the Notes are hereby expressly made subordinate and subject in
right of
<PAGE>
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payment as provided in this Article to the prior payment in full in cash or Cash
Equivalents of all Senior Indebtedness (including the indebtedness under the New
Credit Agreement).
This Article Fourteen shall constitute a continuing offer to all
persons who, in reliance upon such provisions, become Holders of, or continue to
hold Senior Indebtedness; and such provisions are made for the benefit of the
Holders of Senior Indebtedness; and such holders are made obligees hereunder and
they or each of them individually or through their representative may enforce
such provisions.
Section 14.02. Payment Over of Proceeds upon Dissolution, etc.
----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relating to the Company, or (b) any
liquidation, dissolution or other winding-up of the Company, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, then and
in any such event:
(1) the holders of all Senior Indebtedness shall be entitled to
receive payment in full in cash or Cash Equivalents of all Obligations due
in respect of such Senior Indebtedness before the Holders are entitled to
receive any payment or distribution of any kind or character on account of
the Notes; and
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the provisions of this Article shall be paid by the liquidating trustee or
agent or other person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly to the Holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Indebtedness may have
been issued, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness held or represented by each, to the
extent necessary to make payment in full in cash or Cash Equivalents of all
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution to the Holders of such Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section 14.02, the Trustee or the Holder of any Note shall have
received any payment or distribution of properties or assets of the Company
of any kind or character, whether in cash, property or securities, by set
off or otherwise in respect of the Notes before all Senior Indebtedness is
paid or provided for in full in cash, then and in such event such payment
or distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other person making payment or distribution of assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full in cash or Cash
Equivalents, after giving effect to any concurrent payment or distribution
to or for the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
with or into, another person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another person upon the terms and conditions set
forth in Article Eight hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshalling of assets and liabilities of the Company for the purposes of this
Article if
<PAGE>
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the person formed by such consolidation or the surviving entity of such merger
or the person which acquires by conveyance, transfer or lease such properties
and assets substantially as an entirety, as the case may be, shall, as a part of
such consolidation, merger, conveyance, transfer or lease, comply with the
conditions set forth in such Article Eight.
Section 14.03. Suspension of Payment When Designated Senior
--------------------------------------------
Indebtedness is in Default.
- --------------------------
(a) Unless Section 14.02 shall be applicable, during the continuance
of any default in the payment of any Designated Senior Indebtedness pursuant to
which the maturity thereof may immediately be accelerated beyond any applicable
grace period and after receipt by the Trustee from representatives of holders of
such Designated Senior Indebtedness of written notice of such default, no
payment or distribution of any assets of the Company of any kind or character
(excluding any payment or distribution of certain permitted equity or
subordinated securities) shall be made on account of the principal of, premium,
if any, or interest on, or the purchase, redemption or other acquisition of, the
Notes unless and until such default has been cured or waived or has ceased to
exist or such Designated Senior Indebtedness shall have been discharged or paid
in full.
(b) Unless Section 14.02 shall be applicable, upon (1) the occurrence
of a Non-payment Default and (2) receipt by the Trustee from the representatives
of any Holders of Designated Senior Indebtedness of written notice of such
occurrence (a "Payment Blockage Notice") stating that a Non-Payment Default has
occurred and is continuing pursuant to Section 14.03(b) of this Indenture, no
payment or distribution of any assets of the Company of any kind or character
(excluding any payment or distribution of certain permitted equity or
subordinated securities) shall be made by or on behalf of the Company on account
of the principal of, premium, if any, or interest on, or the purchase,
redemption or other acquisition of, the Notes for a period ("Payment Blockage
Period") commencing on the date of receipt by the Trustee of such notice and
will end on the earlier to occur of the following events (subject to any
blockage of payments that may then be in effect under Section 14.02 or
subsection (a) of this Section 14.03), (i) 179 days shall have elapsed since the
receipt of such notice of a Non-payment Default (provided that such Designated
Senior Indebtedness shall not theretofor have been accelerated), (ii) such
default is cured or waived or ceases to exist or such Designated Senior
Indebtedness is discharged or (iii) such Payment Blockage Period shall have been
terminated by written notice to the Company or the Trustee from the
representatives of holders of Designated Senior Indebtedness initiating such
Payment Blockage Period. After the end of any Payment Blockage Period the
Company shall promptly resume making any and all required payments in respect of
the Notes, including any missed payments. Notwithstanding anything in the
subordination provisions of this Indenture or the Notes to the contrary, (x) in
no event shall a Payment Blockage Period extend beyond 179 days from the date of
the receipt by the Trustee of the notice initiating such Payment Blockage
Period, (y) there shall be a period of at least 186 consecutive days in each
365-day period when no Payment Blockage Period is in effect and (z) not more
than one Payment Blockage Period with respect to the Notes may be commenced
within any period of 365 consecutive days. A Non-payment Default with respect
to Designated Senior Indebtedness that existed or was continuing on the date of
the commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period cannot be made the
basis for the commencement of a second Payment Blockage Period, whether or not
within a period of 365 consecutive days, unless such default has been cured or
waived for a period of not less than 90 consecutive days and subsequently
recurs.
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Note shall have received any payment or distribution
prohibited by the foregoing provisions of this Section 14.03, then and in such
event such payment or distribution shall be paid over and delivered forthwith to
representa-
<PAGE>
-83-
tives of the Holders or as a court of competent jurisdiction shall direct for
application to the payment of any due and unpaid Senior Indebtedness, to the
extent necessary to pay all such due and unpaid Senior Indebtedness in cash,
after giving effect to any concurrent payment to or for the Holders of Senior
Indebtedness.
Section 14.04. Trustee's Relation to Senior Indebtedness.
-----------------------------------------
With respect to the Holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Fourteen (and in Article Thirteen
with respect to any Guarantor Senior Indebtedness of the respective Guarantors),
and no implied covenants or obligations with respect to the Holders of Senior
Indebtedness shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the Holders of Senior
Indebtedness and the Trustee shall not be liable to any Holder of Senior
Indebtedness if it shall mistakenly pay over or deliver to Holders, the Company,
the Guarantors or any other person moneys or assets to which any Holder of
Senior Indebtedness shall be entitled by virtue of this Article Fourteen or
otherwise.
Section 14.05. Subrogation to Rights of Holders of Senior
------------------------------------------
Indebtedness.
- ------------
Upon the payment in full in cash of all Senior Indebtedness, the
Holders shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of and
interest on the Notes shall be paid in full in cash or cash equivalents. For
purposes of such subrogation, no payments or distributions to the holders of
Senior Indebtedness of any cash, property or securities to which the Holders or
the Trustee would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article to the holders of
Senior Indebtedness by Holders or the Trustee shall, as among the Company, its
creditors other than holders of Senior Indebtedness, and the Holders, be deemed
to be a payment or distribution by the Company to or on account of the Senior
Indebtedness.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Fourteen shall have
been applied, pursuant to the provisions of this Article Fourteen, to the
payment of all amounts payable under the Senior Indebtedness of the Company,
then and in such case the Holders shall be entitled to receive from the holders
of such Senior Indebtedness at the time outstanding any payments or
distributions received by such holders of such Senior Indebtedness in excess of
the amount sufficient to pay all amounts payable under or in respect of such
Senior Indebtedness in full in cash or cash equivalents.
Section 14.06. Provisions Solely To Define Relative Rights.
-------------------------------------------
The provisions of this Article Fourteen are and are intended solely
for the purpose of defining the relative rights of the Holders on the one hand
and the holders of Senior Indebtedness on the other hand. Nothing contained in
this Article Fourteen or elsewhere in this Indenture or in the Notes is intended
to or shall (a) impair, as among the Company, its creditors other than holders
of Senior Indebtedness and the Holders, the obligation of the Company, which is
absolute and unconditional, to pay to the Holders the principal of, premium, if
any, and interest on the Notes as and when the same shall become due and payable
in accordance with their terms; or (b) affect the relative rights against the
Company of the Holders and creditors of the Company other than the holders of
Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Note from
exercising all remedies otherwise permitted by applicable law upon a Default or
an Event of Default under this Indenture, subject to the rights, if any, under
this Article Fourteen of the holders of Senior Indebtedness (1) in any case,
proceeding, dissolution, liquidation or other winding up, assignment for the
benefit of creditors or
<PAGE>
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other marshalling of assets and liabilities of the Company referred to in
Section 14.02, to receive, pursuant to and in accordance with such Section,
cash, property and securities otherwise payable or deliverable to the Trustee or
such Holder, or (2) under the conditions specified in Section 14.03, to prevent
any payment prohibited by such Section or enforce their rights pursuant to
Section 14.03(c).
The failure to make a payment on the Notes by reason of any provision
of this Article Fourteen shall not be construed as preventing the occurrence of
a Default or an Event of Default hereunder.
Section 14.07. Trustee To Effectuate Subordination.
-----------------------------------
Each Holder of a Note by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article Fourteen and appoints
the Trustee his attorney-in-fact for any and all such purposes, including, in
the event of any dissolution, winding-up, liquidation or reorganization of the
Company whether in bankruptcy, insolvency, receivership proceedings, or
otherwise, the timely filing of a claim for the unpaid balance of the
Indebtedness of the Company owing to such Holder in the form required in such
proceedings and the causing of such claim to be approved. If the Trustee does
not file such a claim prior to 30 days before the expiration of the time to file
such a claim, the holders of Senior Indebtedness, or any Senior Representative,
may file such a claim on behalf of Holders of the Notes.
Section 14.08. No Waiver of Subordination Provisions.
-------------------------------------
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such Holder,
or by any non-compliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such Holder may have
or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this Section
14.08, the Holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders, without
incurring responsibility to the Holders and without impairing or releasing the
subordination provided in this Article Fourteen or the obligations hereunder of
the Holders to the holders of Senior Indebtedness, do any one or more of the
following: (1) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior Indebtedness is
outstanding; (2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any
person liable in any manner for the collection or payment of Senior
Indebtedness; and (4) exercise or refrain from exercising any rights against the
Company and any other person; provided, however, that in no event shall any such
actions limit the right of the Holders to take any action to accelerate the
maturity of the Notes pursuant to Article Five hereof or to pursue any rights or
remedies hereunder or under applicable laws if the taking of such action does
not otherwise violate the terms of this Indenture.
Section 14.09. Notice to Trustee.
-----------------
(a) The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Notes. Notwithstanding the provisions of
this Article Fourteen or any other provision of this Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment
<PAGE>
-85-
to or by the Trustee in respect of the Notes, unless and until the Trustee shall
have received written notice thereof from the Company or a holder of Senior
Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
this Section 14.09, shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 14.09 at least two Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose under this Indenture (including, without limitation, the payment of the
principal of or interest on any Note), then, anything herein contained to the
contrary notwithstanding but without limiting the rights and remedies of the
holders of Senior Indebtedness or any trustee, fiduciary or agent thereof, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within two
Business Days prior to such date; nor shall the Trustee be charged with
knowledge of the curing of any such default or the elimination of the act or
condition preventing any such payment unless and until the Trustee shall have
received an Officers' Certificate to such effect.
(b) Subject to the provisions of Section 6.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice to the Trustee by a
person representing himself to be a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article Fourteen, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such person under this Article Fourteen, and if such evidence is not furnished,
the Trustee may defer any payment to such person pending judicial determination
as to the right of such person to receive such payment.
Section 14.10. Reliance on Judicial Order or Certificate of
--------------------------------------------
Liquidating Agent.
- -----------------
Upon any payment or distribution of assets of the Company referred to
in this Article Fourteen, the Trustee, subject to the provisions of Section
6.01, and the Holders, shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
persons entitled to participate in such payment or distribution, the Holders of
Senior Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article; provided, however, that the
foregoing shall apply only if such court has been fully apprised of the
provisions of this Article Fourteen.
Section 14.11. Rights of Trustee as a Holder of Senior Indebtedness;
-----------------------------------------------------
Preservation of Trustee's Rights.
- --------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Fourteen with respect to any Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness, and nothing in this Indenture shall deprive
the Trustee of any of its
<PAGE>
-86-
rights as such holder. Nothing in this Article Fourteen shall apply to claims
of, or payments to, the Trustee under or pursuant to Section 6.07.
Section 14.12. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article Fourteen in addition to or in place of the Trustee;
provided that Section 14.11 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
Section 14.13. No Suspension of Remedies.
-------------------------
Nothing contained in this Article Fourteen shall limit the right of
the Trustee or the Holders to take any action to accelerate the maturity of the
Notes pursuant to Article Five or to pursue any rights or remedies hereunder or
under applicable law, subject to the rights, if any, under this Article Fourteen
of the Holders, from time to time, of Senior Indebtedness.
<PAGE>
S-1
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
THE GSI GROUP, INC.
By: /s/ John W. Funk
----------------------------------------
Name: John W. Funk
Title: Executive V.P., CFO and Secretary
LASALLE NATIONAL BANK,
as Trustee
By: /s/ DIANE SWANSON
------------------------------------------
Name: DIANE SWANSON
Title: ASST VICE PRESIDENT
<PAGE>
SENIOR SUBORDINATED GUARANTEE
-----------------------------
For value received, the undersigned hereby unconditionally guarantees
to the Holder of this Note the payments of principal of, premium, if any, and
interest on this Note in the amounts and at the time when due and interest on
the overdue principal, premium, if any, and interest, if any, of this Note, if
lawful, and the payment or performance of all other obligations of the Company
under the Indenture or the Notes, to the Holder of this Note and the Trustee,
all in accordance with and subject to the terms and limitations of this Note,
Article Thirteen of the Indenture and this Guarantee. This Guarantee will
become effective in accordance with Article Eleven if the Indenture and its
terms shall be evidenced therein. The validity and enforceability of any
Guarantee shall not be affected by the fact that it is not affixed to any
particular Note.
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth in
Article Thirteen of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates. The Indebtedness evidenced by this
Guarantee is, to the extent and in the manner provided in the Indenture,
subordinate and subject in right of payment to the prior payment in full in cash
of all Guarantor Senior Indebtedness as defined in the Indenture, and this
Guarantee is issued subject to such provisions. Each Holder of a Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such
Holder for such purpose; provided that such subordination provisions shall cease
to affect amounts deposited in accordance with the defeasance provisions of the
Indenture upon the terms and conditions set forth therein.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
DAVID MANUFACTURING CO.
By: /s/ Russ C. Mello
------------------------------
Name: Russ C. Mello
Title: Asst. Treasuer
<PAGE>
EXHIBIT A
---------
THE GSI GROUP, INC.
______________
10 1/4% SENIOR SUBORDINATED NOTE DUE 2007
CUSIP No.
No. _________________ $
THE GSI GROUP, INC., a Delaware corporation (the "Company," which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay _______ to or registered assigns, the principal sum
of ______ United States Dollars on November 1, 2007, at the office or agency of
the Company referred to below, and to pay interest thereon on May 1 and November
1, in each year, commencing on May 1, 1998 (each an "Interest Payment Date"),
accruing from the Issue Date or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, at the rate of 10 1/4% per
annum, until the principal hereof is paid or duly provided for. Interest shall
be computed on the basis of a 360-day year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid in arrears to the Person in whose name this Note (or one
or more predecessor Notes) is registered at the close of business on the April
15 or October 15 (each a "Regular Record Date"), whether or not a Business Day,
as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid, or duly provided for, and interest on such
defaulted interest at the then applicable interest rate borne by the Notes, to
the extent lawful, shall forthwith cease to be payable to the Holder on such
Regular Record Date, and may be paid to the Person in whose name this Note (or
one or more predecessor Notes) is registered at the close of business on a
Special Record Date for the payment of such defaulted interest to be fixed by
the Trustee, notice of which shall be given to Holders of Notes not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in such Indenture.
Payment of the principal of, premium, if any, and interest on this
Note will be made at the Corporate Trust office or agency of the Trustee
maintained for that purpose in The City of New York, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of interest
may be made at the option of the Company by check (which may be a check of the
Company) mailed to the address of the Person entitled thereto as such address
shall appear on the Note Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
A-1
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-mentioned Indenture.
Dated: LASALLE NATIONAL BANK,
as Trustee
By: ______________________________
Authorized Signatory
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
THE GSI GROUP, INC.
By: _______________________________________
Name:
Title:
By: _______________________________________
Name:
Title:
A-3
<PAGE>
(REVERSE OF NOTE)
10 1/4% Senior Subordinated Note due 2007
1. Indenture. This Note is one of a duly authorized issue of Notes
---------
of the Company designated as its 10 1/4% Senior Subordinated Notes due 2007,
(the "Notes"), limited (except as otherwise provided in the Indenture referred
to below) in aggregate principal amount to $ , which may be issued
under an indenture (the "Indenture") dated as of November 1, 1997, by and among
the Company, as Issuer and LaSalle National Bank, as trustee (the "Trustee,"
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties, obligations
and immunities thereunder of the Company, the Trustee and the Holders, and of
the terms upon which the Notes are, and are to be, authenticated and delivered.
All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
No reference herein to the Indenture and no provisions of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the times, place and rate, and in the coin or currency,
herein prescribed.
2. Guarantees. This Note is entitled to certain senior subordinated
----------
Guarantees, if any, made for the benefit of the Holders. Reference is hereby
made to Article Thirteen of the Indenture for terms relating to the Guarantees.
3. Subordination. The Indebtedness evidenced by the Notes is, to
-------------
the extent and in the manner provided in the Indenture, subordinate and subject
in right of payment to the prior payment in full in cash of all existing and
future Senior Indebtedness (including the Indebtedness under the New Credit
Agreement). Each Holder, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Trustee, on behalf of
such Holder, to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints the
Trustee attorney-in-fact of such Holder for such purpose; provided, however,
that the Indebtedness evidenced by this Note shall cease to be so subordinate
and subject in right of payment upon any defeasance of this Note referred to in
Paragraph 7 below.
4. Redemption.
----------
(a) Optional Redemption. Subject to earlier redemption in the manner
-------------------
described in the next two succeeding paragraphs, the Notes will be redeemable at
the option of the Company, in whole or in part, at any time on or after November
1, 2002 at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest, if any, to the date of
redemption, if redeemed during the 12-month period beginning November 1 of the
years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2002 105.188%
2003 103.458
2004 101.729
2005 and thereafter 100.000
</TABLE>
A-4
<PAGE>
On or prior to November 1, 2000, the Company may, at its option, use
the net proceeds of an Equity Offering to redeem up to 35% of the originally
issued aggregate principal amount of the Notes, at a redemption price in cash
equal to 110 1/4% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption; provided, however, that not
less than $65.0 million in aggregate principal amount of Notes is outstanding
following such redemption. Notice of any such redemption must be given not later
than 60 days after the consummation of the Equity Offering.
As used in the preceding paragraph, an ''Equity Offering'' means any
public or private sale of equity securities (other than Redeemable Capital
Stock) of the Company; provided, however, that the proceeds (net of any
underwriting discounts or commissions) to the Company from any such private sale
of equity securities shall be at least $20.0 million.
(b) Redemption Upon Change of Control. Following the occurrence of a
---------------------------------
Change of Control (the date of such occurrence being the ''Change of Control
Date''), the Company will be obligated, not more than 40 or less than 20
business days after the Change of Control Date, to make an offer to purchase (a
''Change of Control Offer'') all of the then outstanding Notes at a purchase
price (the ''Change of Control Purchase Price'') in cash equal to 101% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the purchase date. The Company will be required to purchase all Notes properly
tendered into the Change of Control Offer and not withdrawn.
In order to effect such Change of Control Offer, the Company will, not
later than the 40th business day after the Change of Control Date, be obligated
to mail to each holder of Notes notice of the Change of Control Offer, which
notice will govern the terms of the Change of Control Offer and will state,
among other things, the procedures that holders must follow to accept the Change
of Control Offer. The Change of Control Offer will be required to be kept open
for a period of at least 20 business days.
(c) Sinking Fund. The Company will not be required to make any
------------
mandatory sinking fund payments in respect of the Notes.
(d) Interest Payments. In the case of any redemption of the Notes,
-----------------
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Notes, or one or more predecessor
Notes, of record at the close of business on the relevant Record Date referred
to on the face hereof. Notes (or portions thereof) for whose redemption and
payment provision is made in accordance with the Indenture shall cease to bear
interest from and after the Redemption Date.
(e) Partial Redemption. In the event of redemption of the Note in
------------------
part only, a new Note or Notes for the unredeemed portion hereof shall be issued
in the name of the Holder hereof upon the cancellation hereof.
5. Offers to Purchase. Sections 10.14 and 10.15 of the Indenture
------------------
provide that following certain Asset Sales (with respect to Section 10.14) and
upon the occurrence of a Change of Control (with respect to Section 10.15) and
subject to further limitations contained therein, the Company shall make an
offer to purchase certain amounts of the Notes in accordance with the procedures
set forth in the Indenture.
6. Defaults and Remedies. If an Event of Default shall occur and be
---------------------
continuing, the principal of all of the outstanding Notes, plus all accrued and
unpaid interest, if any, to the date the Notes become due and payable, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
A-5
<PAGE>
7. Defeasance. The Indenture contains provisions (which provisions
----------
apply to this Note) for defeasance at any time of (a) the entire indebtedness of
the Company on this Note and (b) certain restrictive covenants and related
Defaults and Events of Default, in each case upon compliance by the Company with
certain conditions set forth therein.
8. Amendments and Waivers. The Company and the Trustee (if a party
----------------------
thereto) may, without the consent of the Holders of any Outstanding Notes,
amend, waive or supplement the Indenture or the Notes for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies, maintaining the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended, and making any change that does not adversely
affect the rights of any Holder. Other amendments and modifications of the
Indenture or the Notes may be made by the Company and the Trustee with the
consent of the Holders of not less than a majority of the aggregate principal
amount of the Outstanding Notes, subject to certain exceptions requiring the
consent of the Holders of the particular Notes to be affected. Any such consent
or waiver by or on behalf of the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange herefor or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Note.
9. Denominations, Transfer and Exchange. The Notes are issuable
------------------------------------
only in registered form without coupons in denominations of $1,000 and any
integral multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes of the authorized denomination, as requested by the
Holder surrendering the same.
The transfer of this Note is registrable on the Note Register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company maintained for such purpose in the Borough of Manhattan
in The City of New York or at such other office or agency of the Company as may
be maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes, of authorized denominations and
for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
10. Persons Deemed Owners. Prior to and at the time of due
---------------------
presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
this Note is registered as the owner hereof for all purposes, whether or not
this Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
11. Registration Rights. Pursuant to the Registration Rights
-------------------
Agreement among the Company, the Guarantors, if any, and the Initial Purchasers
for themselves and on behalf of the Holders of the Initial Notes, the Company
will be obligated to consummate an exchange offer pursuant to which the Holder
of this Note shall have the right to exchange this Note for the Company's 10
1/4% Senior Subordinated Notes due 2007, which will have been registered under
the Securities Act, in like principal amount and having terms identical in all
material respects as the Initial Notes. The Holders of the Initial Notes shall
be entitled to receive certain additional interest payments in the event such
exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
12. No Recourse Against Others. No director, officer, employee or
--------------------------
stockholder of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or any Guarantor under the Notes, the
Guarantees or this Indenture. Each Holder by accepting a Note waives and
releases all such liability, and such waiver and release is part of the
consideration for the issuance of the Notes.
A-6
<PAGE>
13. GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). THE
TRUSTEE, THE COMPANY, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND THE HOLDERS
AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL
OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS
NOTE.
A-7
<PAGE>
ASSIGNMENT FORM
If you, the Holder want to assign this Note, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Note to
________________________________________________________________________________
(Insert assignee's social security or tax ID number)____________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
________________________________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for such agent.
Date:_________________ Your signature: ____________________________
(Sign exactly as your name
appears on the other side of
this Note)
By: ________________________
NOTICE: To be executed
by an executive officer
NOTICE: Signature(s) must be guaranteed by an institution which is a
participant in the Securities Transfer Agent Medallion Program ("STAMP") or
similar program.
A-8
<PAGE>
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) the second anniversary of the Issue Date, the undersigned
confirms that it has not utilized any general solicitation or general
advertising in connection with and that such transfer is:
[Check One]
---------
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities
Act of 1933, as amended; or
(3) __ to an institutional "accredited investor" (as defined in Rule 501(a)
(1), (2), (3) or (7) under the Securities Act of 1933, as amended)
that has furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(4) __ outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as
amended; or
(5) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof, provided, that if box (3), (4) or (5) is checked, the
--------
Company or the Trustee may require, prior to registering any such transfer of
the Notes, in its sole discretion, such written legal opinions, certifications
(including an investment letter in the case of box (3) or (4)), and other
information as the Trustee, Note Registrar or the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended.
If none of the foregoing boxes are checked, the Trustee or Note
Registrar shall not be obligated to register this Note in the name of any person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.05 of the Indenture
shall have been satisfied.
Date:_________________ Your signature: _________________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee: ____________
A-9
<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date: ___________________ _________________________________________________
NOTICE: To be executed by an executive officer
A-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 10.14 or 10.15 of the Indenture, check the Box: [_]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 10.14 or 10.15 of the Indenture, state the amount:
$_____________
Date:_____________ Your signature: ________________________________
(Sign exactly as your name
appears on the other side
of this Note)
By: ___________________________
NOTICE: To be signed by an
executive officer
NOTICE: Signature(s) must be guaranteed by an institution which is a
participant in the Securities Transfer Agent Medallion Program ("STAMP") or
similar program.
A-11
<PAGE>
EXHIBIT B
---------
THE GSI GROUP, INC.
______________
10 1/4% SENIOR SUBORDINATED NOTE DUE 2007
CUSIP No.
No. __________________ $
THE GSI GROUP, INC. a Delaware corporation (the "Company," which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to _____________, or registered assigns, the principal
sum of _________ United States Dollars on November 1, 2007, at the office or
agency of the Company referred to below, and to pay interest thereon on May 1
and November 1 in each year, commencing on May 1, 1998 (each an "Interest
Payment Date"), accruing from the Issue Date or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, at the rate
of 10 1/4% per annum, until the principal hereof is paid or duly provided for.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid in arrears to the Person in whose name this Note (or one
or more predecessor Notes) is registered at the close of business on the April
15 or October 15 (each a "Regular Record Date"), whether or not a Business Day,
as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid, or duly provided for, and interest on such
defaulted interest at the then applicable interest rate borne by the Notes, to
the extent lawful, shall forthwith cease to be payable to the Holder on such
Regular Record Date, and may be paid to the Person in whose name this Note (or
one or more predecessor Notes) is registered at the close of business on a
Special Record Date for the payment of such defaulted interest to be fixed by
the Trustee, notice of which shall be given to Holders of Notes not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in such Indenture.
Payment of the principal of, premium, if any, and interest on this
Note will be made at the corporate trust office or agency of the Trustee
maintained for that purpose in The City of New York, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts: provided, however, that payment of interest
may be made at the option of the Company by check (which may be a check of the
Company) mailed to the address of the Person entitled thereto as such address
shall appear on the Note Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
B-1
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
Dated: LASALLE NATIONAL BANK,
as Trustee
By: _______________________________
Authorized Signatory
B-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
THE GSI GROUP, INC.
By: ________________________________________
Name:
Title:
By: ________________________________________
Name:
Title:
B-3
<PAGE>
(REVERSE OF NOTE)
10 1/4% Senior Subordinated Note due 2007
1. Indenture. This Note is one of a duly authorized issue of Notes
---------
of the Company designated as its 10 1/4% Senior Subordinated Notes due 2007 (the
"Notes"), limited (except as otherwise provided in the Indenture referred to
below) in aggregate principal amount to $, which may be issued under an
indenture (the "Indenture") dated as of November 1, 1997, by and among the
Company, as Issuer and LaSalle National Bank, as trustee (the "Trustee," which
term includes any successor Trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee and the Holders, and of the terms upon
which the Notes are, and are to be, authenticated and delivered.
All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
No reference herein to the Indenture and no provisions of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the times, place and rate, and in the coin or currency,
herein prescribed.
2. Guarantees. This Note is entitled to certain senior subordinated
----------
Guarantees, if any, made for the benefit of the Holders. Reference is hereby
made to Article Thirteen of the Indenture for terms relating to the Guarantees.
3. Subordination. The Indebtedness evidenced by the Notes is, to
-------------
the extent and in the manner provided in the Indenture, subordinate and subject
in right of payment to the prior payment in full in cash of all existing and
future Senior Indebtedness (including the Indebtedness under the New Credit
Agreement). Each Holder, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Trustee, on behalf of
such Holder, to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints the
Trustee attorney-in-fact of such Holder for such purpose; provided, however,
that the Indebtedness evidenced by this Note shall cease to be so subordinate
and subject in right of payment upon any defeasance of this Note referred to in
Paragraph 7 below.
4. Redemption.
----------
(a) Optional Redemption. Subject to earlier redemption in the manner
-------------------
described in the next two succeeding paragraphs, the Notes will be redeemable at
the option of the Company, in whole or in part, at any time on or after November
1, 2002, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest, if any, to the date of
redemption, if redeemed during the 12-month period beginning November 1 of the
years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2002 105.188%
2003 103.458%
2004 101.729%
2005 and thereafter 100.000%
</TABLE>
B-4
<PAGE>
On or prior to November 1, 2000, the Company may, at its option, use
the net proceeds of an Equity Offering to redeem up to 35% of the originally
issued aggregate principal amount of the Notes, at a redemption price in cash
equal to 110 1/4% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption; provided, however, that not
less than $65.0 million in aggregate principal amount of Notes is outstanding
following such redemption. Notice of any such redemption must be given not later
than 60 days after the consummation of the Equity Offering.
As used in the preceding paragraph, an ''Equity Offering'' means any
public or private sale of equity securities (other than Redeemable Capital
Stock) of the Company; provided, however, that the proceeds (net of any
underwriting discounts or commissions) to the Company from any such private sale
of equity securities shall be at least $20.0 million.
(b) Redemption Upon Change of Control. Following the occurrence of a
---------------------------------
Change of Control (the date of such occurrence being the ''Change of Control
Date''), the Company will be obligated, not more than 40 or less than 20
business days after the Change of Control Date, to make an offer to purchase (a
''Change of Control Offer'') all of the then outstanding Notes at a purchase
price (the ''Change of Control Purchase Price'') in cash equal to 101% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the purchase date. The Company will be required to purchase all Notes properly
tendered into the Change of Control Offer and not withdrawn.
In order to effect such Change of Control Offer, the Company will, not
later than the 40th business day after the Change of Control Date, be obligated
to mail to each holder of Notes notice of the Change of Control Offer, which
notice will govern the terms of the Change of Control Offer and will state,
among other things, the procedures that holders must follow to accept the Change
of Control Offer. The Change of Control Offer will be required to be kept open
for a period of at least 20 business days.
(c) Sinking Fund. The Company will not be required to make any
------------
mandatory sinking fund payments in respect of the Notes.
(d) Interest Payments. In the case of any redemption of the Notes,
-----------------
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Notes, or one or more predecessor
Notes, of record at the close of business on the relevant Record Date referred
to on the face hereof. Notes (or portions thereof) for whose redemption and
payment provision is made in accordance with the Indenture shall cease to bear
interest from and after the Redemption Date.
(e) Partial Redemption. In the event of redemption of the Note in
------------------
part only, a new Note or Notes for the unredeemed portion hereof shall be issued
in the name of the Holder hereof upon the cancellation hereof.
5. Offers to Purchase. Sections 10.14 and 10.15 of the Indenture
------------------
provide that following certain Asset Sales (with respect to Section 10.14) and
upon the occurrence of a Change of Control (with respect to Section 10.15) and
subject to further limitations contained therein, the Company shall make an
offer to purchase certain amounts of the Notes in accordance with the procedures
set forth in the Indenture.
6. Defaults and Remedies. If an Event of Default shall occur and be
---------------------
continuing, the principal of all of the outstanding Notes, plus all accrued and
unpaid interest, if any, to the date the Notes become due and payable, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
7. Defeasance. The Indenture contains provisions (which provisions
----------
apply to this Note) for defeasance at any time of (a) the entire indebtedness of
the Company on this Note and (b) certain
B-5
<PAGE>
restrictive covenants and related Defaults and Events of Default, in each case
upon compliance by the Company with certain conditions set forth therein.
8. Amendments and Waivers. The Company and the Trustee (if a party
----------------------
thereto) may, without the consent of the Holders of any Outstanding Notes,
amend, waive or supplement the Indenture or the Notes for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies, maintaining the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended, and making any change that does not adversely
affect the rights of any Holder. Other amendments and modifications of the
Indenture or the Notes may be made by the Company and the Trustee with the
consent of the Holders of not less than a majority of the aggregate principal
amount of the Outstanding Notes, subject to certain exceptions requiring the
consent of the Holders of the particular Notes to be affected. Any such consent
or waiver by or on behalf of the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange herefor or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Note.
9. Denominations, Transfer and Exchange. The Notes are issuable
------------------------------------
only in registered form without coupons in denominations of $1,000 and any
integral multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes of the authorized denomination, as requested by the
Holder surrendering the same.
The transfer of this Note is registrable on the Note Register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company maintained for such purpose in the Borough of Manhattan
in The City of New York or at such other office or agency of the Company as may
be maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes, of authorized denominations and
for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
10. Persons Deemed Owners. Prior to and at the time of due
---------------------
presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
this Note is registered as the owner hereof for all purposes, whether or not
this Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
11. No Recourse Against Others. No director, officer or employee or
--------------------------
stockholder of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or any Guarantor under the Notes, the
Guarantees or the Indenture. Each Holder of Notes by accepting a Note waives
and releases all such liability, and such waiver and release is part of the
consideration for the issuance of the Notes.
12. GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). THE
TRUSTEE, THE COMPANY, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND THE HOLDERS
AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL
OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS
NOTE.
B-6
<PAGE>
ASSIGNMENT FORM
If you, the Holder, want to assign this Note, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Note to
________________________________________________________________________________
(Insert assignee's social security or tax ID number) ___________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
________________________________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for such agent.
Date:________________ Your signature: ______________________________
(Sign exactly as your name
appears on the other side of
this Note)
By: __________________________
NOTICE: To be executed
by an executive officer
NOTICE: Signature(s) must be guaranteed by an institution which is a
participant in the Securities Transfer Agent Medallion Program ("STAMP") or
similar program.
B-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 10.14 or 10.15 of the Indenture, check the Box: [_]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 10.14 or 10.15 of the Indenture, state the amount:
$_______________
Date: __________________ Your signature: ____________________________
(Sign exactly as your name
appears on the other side
of this Note)
By: ________________________
NOTICE: To be signed
by an executive officer
NOTICE: Signature(s) must be guaranteed by an institution which is a
participant in the Securities Transfer Agent Medallion Program ("STAMP") or
similar program.
B-8
<PAGE>
EXHIBIT C
---------
Form of Certificate To Be
Delivered in Connection with Subsequent
Transfers to Non-QIB Accredited Investors
-----------------------------------------
_______________, ____
Re: The GSI Group, Inc. (the "Company")
10 1/4% Senior Subordinated Notes due 2007 (the "Notes")
--------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
dated as of November 1, 1997 relating to the Notes (the "Indenture") and
the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Notes except in compliance with, such restrictions
and conditions and the Securities Act of 1933, as amended (the "Securities
Act").
2. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter stated, that
if we should sell any Notes within two years after the original issuance of
the Notes, we will do so only (A) to the Company or any subsidiary thereof,
(B) inside the United States in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein),
(C) inside the United States to an "institutional accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on
its behalf by a U.S. broker-dealer) to you a signed letter substantially in
the form of this letter, (D) outside the United States in accordance with
Rule 904 of RegulationS under the Securities Act, (E) pursuant to an
effective registration statement under the Securities Act, and we further
agree to provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein, or (F) pursuant to another available exemption from the
registration requirements of the Securities Act.
3. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certification, written
legal opinions and other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment, as the case may be.
C-1
<PAGE>
5. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
C-2
<PAGE>
You the Company and counsel for the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:______________________________________
Authorized Signature
C-3
<PAGE>
EXHIBIT D
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
------------------------
______________, ____
Attention:
Re: The GSI Group, Inc. (the "Company")
10 1/4% Senior Subordinated Notes due 2007 (the "Notes")
--------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $__________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
D-1
<PAGE>
You, the Company and counsel for the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferee]
By:______________________________
D-2
<PAGE>
EXHIBIT E
SENIOR SUBORDINATED GUARANTEE
-----------------------------
For value received, the undersigned hereby unconditionally guarantees
to the Holder of this Note the payments of principal of, premium, if any, and
interest on this Note in the amounts and at the time when due and interest on
the overdue principal, premium, if any, and interest, if any, of this Note, if
lawful, and the payment or performance of all other obligations of the Company
under the Indenture or the Notes, to the Holder of this Note and the Trustee,
all in accordance with and subject to the terms and limitations of this Note,
Article Thirteen of the Indenture and this Guarantee. This Guarantee will
become effective in accordance with Article Eleven of the Indenture and its
terms shall be evidenced therein. The validity and enforceability of any
Guarantee shall not be affected by the fact that it is not affixed to any
particular Note.
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth in
Article Thirteen of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates. The Indebtedness evidenced by this
Guarantee is, to the extent and in the manner provided in the Indenture,
subordinate and subject in right of payment to the prior payment in full in cash
of all Guarantor Senior Indebtedness as defined in the Indenture, and this
Guarantee is issued subject to such provisions. Each Holder of a Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such
Holder for such purpose; provided that such subordination provisions shall cease
to affect amounts deposited in accordance with the defeasance provisions of the
Indenture upon the terms and conditions set forth therein.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
[ ]
By: ________________________________________
Name:
Title:
E-1
<PAGE>
Exhibit 4.2
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of December 19, 1997, is
between THE GSI GROUP, INC., a Delaware corporation (the "Company"), and LASALLE
NATIONAL BANK, as trustee (herein called the "Trustee").
PRELIMINARY STATEMENT
The Company and the Trustee have entered into an Indenture (the
"Indenture"), dated as of November 1, 1997 with respect to the Company's 10 1/4%
Senior Subordinated Notes due 2007 (the "Notes"). Capitalized terms used herein,
not otherwise defined herein, shall have the meanings given them in the
Indenture.
Section 9.01 of the Indenture expressly provides that the Company, when
authorized by its board of directors, and the Trustee may enter into a
supplemental indenture, without the consent of any Holders of Notes, in order to
comply with any requirement of the Securities and Exchange Commission to effect
or maintain the qualification of the Indenture under the Trust Indenture Act of
1939. In accordance with the terms of Section 9.01 of the Indenture, the Company
has, by Board Resolution, authorized this First Supplemental Indenture. The
Trustee has determined that this First Supplemental Indenture is in form
satisfactory to it.
NOW, THEREFORE, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes issued under the Indenture
from and after the date of this First Supplemental Indenture, as follows:
Section 1. Amendment to the Indenture.
1.1 Section 6.01(c) of the Indenture is amended by (i) deleting the word
"gross" two times as such word appears in the second line of such Section
6.01(c) and (ii) deleting the word "grossly" from the fifth line of such Section
6.01(c).
1.2 Section 7.04 of the Indenture is hereby deleted in its entirety and
replaced with the following language:
"Section 7.04. Reports by the Company and Each Guarantor
The Company and each Guarantor shall:
(a) file with the Trustee copies of the reports and of the
information and documents which the Company and each Guarantor is required
to provide to any Person under Section 10.09, hereof, and, if the Company
or any Guarantor is not required to file information, documents or reports
pursuant to Section 13 or Section 15(d) of the Exchange Act, to file with
the Trustee and the
<PAGE>
Commission, in accordance with, and so long as not prohibited by, the rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Exchange Act in respect of a
security listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with the
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company and each Guarantor with the covenants of this Indenture as is
required from time to time by such rules and regulations (including such
information, documents and reports referred to in Trust Indenture Act
Section 314(a)(2)); and
(c) transmit by mail to all Holders, in a manner and to the extent
provided in Trust Indenture Act Section 313(c), such summaries of any
information, documents and reports required to be filed by the Company and
each Guarantor pursuant to section 10.09 hereof and subsections (a) and (b)
of this Section as is required and not prohibited by rules and regulations
prescribed from time to time by the Commission."
Section 2. Effect on the Indenture
Except as modified hereby, all of the terms and provisions of the Indenture
shall remain in full force and effect.
Section 3. Counterparts
This First Supplemental Indenture may be executed in several counterparts,
all of which together shall constitute one agreement binding on all parties,
notwithstanding that all parties have not signed the same counterpart.
-2-
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused this First
Supplemental Indenture to be duly executed by their respective officers
thereunto duly authorized all as of the day and year first above written.
THE GSI GROUP, INC.
By: /s/ John Funk
-----------------------------
Name: John Funk
---------------------------
Its: CFO
----------------------------
LASALLE NATIONAL BANK
as Trustee
By: /s/ Diane Swanson
-----------------------------
Name: Diane Swanson
---------------------------
Its: AVP
----------------------------
-3-
<PAGE>
Exhibit 4.3
SECOND SUPPLEMENTAL INDENTURE
THIS SECOND SUPPLEMENTAL INDENTURE, dated as of December 19, 1997, is
executed by DAVID MANUFACTURING CO. ("DMC"), an Iowa corporation and wholly-
owned subsidiary of THE GSI GROUP, INC., a Delaware corporation (the "Company"),
for the sole purpose of granting a guarantee under the Indenture (as amended
from time to time, the "Indenture"), dated as of November 1, 1997, with respect
to the Company's 10 1/4% Senior Subordinated Notes due 2007 (the "Notes"),
entered into by the Company and LASALLE NATIONAL BANK, as trustee (the
"Trustee").
PRELIMINARY STATEMENT
The Company and the Trustee have entered into the Indenture. Capitalized
terms used herein, not otherwise defined herein, shall have the meanings given
them in the Indenture.
Section 13.03 of the Indenture expressly provides that any person who was
not a Guarantor at the time the Indenture was executed can become a Guarantor by
executing a supplemental indenture. Pursuant to such Section 13.03 of the
Indenture, DMC executes this Second Supplemental Indenture to become a Guarantor
of the Company's Notes. DMC has, by Board Resolution, authorized this Second
Supplemental Indenture. The Trustee has determined that this Second Supplemental
Indenture is in form satisfactory to it.
NOW, THEREFORE, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes issued under the Indenture
from and after the date of this Second Supplemental Indenture, as follows:
Section 1. Guarantee on the Notes.
DMC hereby subjects itself to the provisions of the Indenture as a
Guarantor in accordance with Article XIII of the Indenture.
Section 2. Counterparts
This Second Supplemental Indenture may be executed in several counterparts,
all of which together shall constitute one agreement binding on all parties,
notwithstanding that all parties have not signed the same counterpart.
IN WITNESS WHEREOF, DMC has caused this Second Supplemental Indenture to be
duly executed by its officers as of the day and year first above written.
DAVID MANUFACTURING CO.
By: /s/ Russ Mello
-------------------------------
Name: Russ Mello
-----------------------------
Its:
------------------------------
<PAGE>
EXHIBIT 4.4
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of November 1, 1997
by and among
THE GSI GROUP, INC.
and
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
================================================================================
<PAGE>
1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
---------
entered into as of November 1, 1997 by and among The GSI GROUP, INC., a Delaware
corporation (the "Company") and MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE,
-------
FENNER & SMITH INCORPORATED ("Merrill Lynch"), and MORGAN STANLEY & CO.
-------------
INCORPORATED (together with Merrill Lynch, the "Initial Purchasers").
------------------
This Agreement is made pursuant to the Purchase Agreement dated as of
October 30, 1997 by and among the Company and the Initial Purchasers (the
"Purchase Agreement"), which provides for, among other things, the sale by the
------------------
Company to the Initial Purchasers of an aggregate of $100,000,000 principal
amount of the Company's 10 1/4% Senior Subordinated Notes due 2007 (the
"Securities"). In order to induce the Initial Purchasers to enter into the
----------
Purchase Agreement, the Company has agreed to provide to the Initial Purchasers
and their direct and indirect transferees the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
-----------
capitalized defined terms shall have the following meanings:
"Additional Interest" shall have the meaning set forth in Section 2(e)
-------------------
hereof.
"Advice" shall have the meaning set forth in the last paragraph of
------
Section 3 hereof.
"Applicable Period" shall have the meaning set forth in Section 3(s)
-----------------
hereof.
"Business Day" shall mean a day that is not a Saturday, a Sunday, or
------------
a day on which banking institutions in New York, New York are required to
be closed.
"Closing Time" shall mean the Closing Time as defined in the Purchase
------------
Agreement.
<PAGE>
-2-
"Company" shall have the meaning set forth in the preamble to this
-------
Agreement and also includes the Company's successors and permitted assigns.
"Depositary" shall mean The Depository Trust Company, or any other
----------
depositary appointed by the Company; provided, however, that such
depositary must have an address in the Borough of Manhattan, in The City of
New York.
"Effectiveness Period" shall have the meaning set forth in
--------------------
Section 2(b) hereof.
"Effectiveness Target Date" shall have the meaning set forth in
-------------------------
Section 2(e) hereof.
"Event Date" shall have the meaning set forth in Section 2(e) hereof.
----------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Exchange Offer" shall mean the exchange offer by the Company of
--------------
Exchange Securities for Securities pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
---------------------------
Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
-------------------------------------
registration statement on an appropriate form under the Securities Act, and
all amendments and supplements to such registration statement, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2(a)
---------------
hereof.
"Exchange Securities" shall mean the 10 1/4% Senior Subordinated Notes
-------------------
due 2007, issued by the Company to be offered to Holders of Securities in
exchange for Securities pursuant to the Exchange Offer, which shall be
identical to the Securities (except that (i) interest thereon shall accrue
from the last date on which interest was paid on the Securities or, if no
such interest has been paid, from November 5, 1997, (ii) the transfer
restrictions thereon
<PAGE>
-3-
and all registration rights in respect thereof shall be eliminated and
(iii) the provisions relating to Additional Interest shall be eliminated).
"Holders" shall mean the Initial Purchasers, for so long as they own
-------
any Registrable Securities, each of their direct and indirect successors,
assigns and transferees who become registered owners of Registrable
Securities under the Indenture and each Participating Broker-Dealer that
holds Exchange Securities for so long as such Participating Broker-Dealer
is required to deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Securities.
"Indenture" shall mean the Indenture relating to the Securities dated
---------
as of November 1, 1997 between the Company and LaSalle National Bank, as
trustee, as the same may be amended from time to time in accordance with
the terms thereof.
"Initial Purchasers" shall have the meaning set forth in the preamble
------------------
to this Agreement.
"Inspectors" shall have the meaning set forth in Section 3(m) hereof.
----------
"Issue Date" shall mean the date on which the Securities are
----------
originally issued.
"Majority Holders" shall mean the Holders of a majority of the
----------------
aggregate principal amount of outstanding Registrable Securities.
"Participating Broker-Dealer" shall have the meaning set forth in
---------------------------
Section 3(s) hereof.
"Person" shall mean an individual, partnership, corporation, limited
------
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Private Exchange" shall have the meaning set forth in Section 2(a)
----------------
hereof.
"Private Exchange Securities" shall have the meaning set forth in
---------------------------
Section 2(a) hereof.
<PAGE>
-4-
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the preamble
------------------
to this Agreement.
"Records" shall have the meaning set forth in Section 3(m) hereof.
-------
"Registrable Securities" shall mean each Security and, if issued, each
----------------------
Private Exchange Security; provided, however, that each Security or Private
Exchange Security, as the case may be, shall cease to be a Registrable
Security when (i) with respect to a Security only, such Security has been
exchanged by a person other than a Participating Broker-Dealer for an
Exchange Security in the Exchange Offer, (ii) with respect to a Security
only, following the exchange by a Participating Broker-Dealer in the
Exchange Offer of a Security for an Exchange Security, which such Exchange
Security is sold to a purchaser who receives from such Participating
Broker-Dealer on or prior to the date of such sale a copy of the Prospectus
contained in the Exchange Offer Registration Statement, as amended or
supplemented, (iii) the date on which such Security or Private Exchange
Security, as the case may be, has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement, (iv) the date on which such Security or Private Exchange
Security, as the case may be, is distributed to the public pursuant to Rule
144 under the Securities Act (or any similar provision then in force, but
not Rule 144A under the Securities Act), (v) such Security or Private
Exchange Security, as the case may be, shall have been otherwise
transferred by the holder thereof and a new Security not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such new Security shall not require registration
or qualification under the Securities Act or any similar state law then in
force or (vi) such Security or
<PAGE>
-5-
Private Exchange Security, as the case may be, ceases to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all applicable SEC, stock exchange or National
Association of Securities Dealers, Inc. (the "NASD") registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws (including reasonable
fees and disbursements of one counsel for Holders that are Initial
Purchasers in connection with blue sky qualification of any of the Exchange
Securities or Registrable Securities) and compliance with the rules of the
NASD, (iii) all applicable expenses incurred by the Company in preparing or
assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus and any amendments or supplements
thereto, and in preparing or assisting in preparing any other documents
relating to the performance of and compliance with this Agreement, (iv) all
rating agency fees, if any, (v) the fees and disbursements of counsel for
the Company, (vii) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges, if the Company, in its discretion, elects to make
any such listing; but excluding fees of counsel to the Holders and
underwriting discounts and commissions and transfer taxes, if any, relating
to the sale or disposition of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement
----------------------
(including, without limitation, the Exchange Offer Registration Statement
and the Shelf Registration Statement) of the Company which covers any of
the Exchange Securities or Registrable Securities pursuant to the
provisions of this Agreement, and all amendments and supplements to any
such Registration Statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities" shall have the meaning set forth in the preamble to this
----------
Agreement.
<PAGE>
-6-
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Shelf Registration" shall mean a registration effected pursuant to
------------------
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
----------------------------
statement of the Company relating to a "shelf" offering in accordance with
Rule 415 of the Securities Act, or any similar rule that may be adopted by
the SEC, pursuant to the provisions of Section 2(b) hereof which covers all
of the Registrable Securities or all of the Private Exchange Securities, as
the case may be, on an appropriate form under the Securities Act, and all
amendments and supplements to such registration statement, including post-
effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Subsidiary Guarantors" shall mean each of the Company's future
---------------------
subsidiaries that has executed a supplemental indenture pursuant to the
Indenture guaranteeing the Notes.
"TIA" shall have the meaning set forth in Section 3(k) hereof.
---
"Trustee" shall mean the trustee with respect to the Securities under
-------
the Indenture.
2. Registration Under the Securities Act.
-------------------------------------
(a) Exchange Offer. To the extent not prohibited by any applicable
--------------
law or applicable policy of the SEC, the Company shall, for the benefit of the
Holders, at the Company's cost, use its best efforts to (i) cause to be filed
with the SEC within 90 days after the Closing Time an Exchange Offer
Registration Statement on an appropriate form under the Securities Act covering
the offer by the Company to the Holders to exchange all of the Registrable
Securities (other than Private Exchange Securities) for a like principal amount
of Exchange Securities, (ii) have such Exchange Offer Registration Statement
declared effective under the Securities Act by the SEC not later than the date
which is 150 days after the Closing Time, (iii) have such Registration Statement
remain effective until the closing of the Exchange Offer and (iv) commence the
Exchange Offer and, on or prior to 180 days after the Closing Time, issue
Exchange Securities in exchange for all Securities
<PAGE>
-7-
properly tendered prior thereto in the Exchange Offer. Upon the effectiveness of
the Exchange Offer Registration Statement, the Company shall promptly commence
the Exchange Offer, it being the objective of such Exchange Offer to enable each
Holder eligible and electing to exchange Registrable Securities (other than
Private Exchange Securities) for Exchange Securities (assuming that such Holder
is not an affiliate of the Company within the meaning of Rule 405 under the
Securities Act and is not a broker-dealer tendering Registrable Securities
acquired directly from the Company for its own account, acquires the Exchange
Securities in the ordinary course of such Holder's business and has no
arrangements or understandings with any Person to participate in the Exchange
Offer for the purpose of distributing (within the meaning of the Securities Act)
the Exchange Securities) and to transfer such Exchange Securities from and after
their receipt without any limitations or restrictions under the Securities Act
and under state securities or blue sky laws.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Exchange Offer open for acceptance for a period of not
less than ____ Business Days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law) (such period referred to
herein as the "Exchange Period");
---------------
(iii) utilize the services of the Depositary for the Exchange Offer;
(iv) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last Business Day of the
Exchange Period, by sending to the institution specified in the notice, a
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Securities delivered for exchange, and a statement that
such Holder is withdrawing his election to have such Securities exchanged;
and
(v) otherwise comply in all material respects with all applicable
laws relating to the Exchange Offer.
<PAGE>
-8-
If, prior to consummation of the Exchange Offer the Initial Purchasers
hold any Securities acquired by them and having the status of an unsold
allotment in the initial distribution, the Company upon the request of any such
Initial Purchaser shall, to the extent not prohibited by any applicable law or
applicable policy of the SEC, use its best efforts to simultaneously with the
delivery of the Exchange Securities in the Exchange Offer, issue and deliver to
such Initial Purchaser in exchange (the "Private Exchange") for the Securities
----------------
held by such Initial Purchaser, a like principal amount of debt securities of
the Company, that are identical to the Exchange Securities, except that (i) such
securities shall bear appropriate transfer restrictions and (ii) the
registration rights in respect thereof shall continue to apply (the "Private
-------
Exchange Securities").
- -------------------
The Exchange Securities and the Private Exchange Securities shall be
issued under (i) the Indenture or (ii) an indenture identical to all material
respects to the Indenture and which, in either case, has been qualified under
the TIA or is exempt from such qualification and shall provide that the Exchange
Securities shall not be subject to the transfer restrictions set forth in the
Indenture. The Indenture or such indenture shall provide that the Exchange
Securities, the Private Exchange Securities and the Securities shall vote and
consent together on all matters as one class and that none of the Exchange
Securities, the Private Exchange Securities or the Securities will have the
right to vote or consent as a separate class on any matter. The Private Exchange
Securities shall be of the same series as, and the Company shall use all
commercially reasonable efforts to have the Private Exchange Securities bear the
same CUSIP number as, the Exchange Securities. Neither the Company nor any of
its Subsidiaries shall have any liability under this Agreement solely as a
result of such Private Exchange Securities not bearing the same CUSIP number as
the Exchange Securities.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or Private Exchange, as
the case may be, does not violate applicable law or any applicable policy of the
SEC, (ii) no action or proceeding shall have been instituted or threatened in
any court or by any governmental agency which might materially impair the
ability of the Company to proceed with the Exchange Offer or the Private
Exchange, and no material adverse development shall have occurred in any
existing action or proceeding with respect to the Company, (iii) all
governmental approvals shall have been obtained, which approvals the Company
deems
<PAGE>
-9-
necessary for the consummation of the Exchange Offer or Private Exchange
and (iv) the due tendering of Registrable Securities in accordance with the
terms of the Exchange Offer. As soon as practicable after the close of the
Exchange Offer and/or the Private Exchange, as the case may be, the Company
shall:
(i) accept for exchange all Registrable Securities or portions
thereof properly tendered and not validly withdrawn pursuant to the
Exchange Offer in accordance with the terms of the Exchange Offer
Registration Statement and the letter of transmittal that is an exhibit
thereto;
(ii) accept for exchange all Securities properly tendered pursuant to
the Private Exchange; and
(iii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so accepted for
exchange by the Company, and issue, and cause the Trustee under the
Indenture to promptly authenticate and deliver to each Holder, a new
Exchange Security or Private Exchange Security, as the case may be, equal
in principal amount to the principal amount of the Registrable Securities
surrendered by such Holder and accepted for exchange.
To the extent not prohibited by any law or applicable policy of the
SEC, the Company shall use its best efforts to complete the Exchange Offer as
provided above, and shall comply with the applicable requirements of the
Securities Act, the Exchange Act and other applicable laws in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than those set forth in the immediately preceding paragraph. Each Holder
of Registrable Securities (other than Private Exchange Securities) who wishes to
exchange such Registrable Securities for Exchange Securities in the Exchange
Offer will be required to make certain customary representations in connection
therewith, including representations that such Holder is not an affiliate of the
Company within the meaning of Rule 405 under the Securities Act, that it is not
a broker-dealer tendering Registrable Securities acquired directly from the
Company for its own account, that any Exchange Securities to be received by it
will be acquired in the ordinary course of business and that at the time of the
commencement of the Exchange Offer it has no arrangement or understanding with
any Person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Securities. The Company shall inform the Initial
Purchasers of the names and
<PAGE>
-10-
addresses of the Holders to whom the Exchange Offer is made, and the Initial
Purchasers shall have the right to contact such Holders and otherwise facilitate
the tender of Registrable Securities in the Exchange Offer.
Upon consummation of the Exchange Offer in accordance with this
Section 2(a), the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Securities that are Private
Exchange Securities and Exchange Securities held by Participating Broker-
Dealers, and the Company shall have no further obligation to register
Registrable Securities (other than Private Exchange Securities) pursuant to
Section 2(b) hereof.
(b) Shelf Registration. In the event that (i) the Company is not
------------------
permitted to file the Exchange Offer Registration Statement or to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy, (ii) the Exchange Offer is not for any other reason
consummated within 180 days after the Issue Date, (iii) any holder of Securities
notifies the Company within 20 Business Days after the commencement of the
Exchange Offer that (a) due to a change in applicable law or SEC policy it is
not entitled to participate in the Exchange Offer, (b) due to a change in
applicable law or SEC policy it may not resell the Exchange Securities to be
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such holder or (c)
it is a broker-dealer and owns Securities acquired directly from the Company for
its own account or (iv) the holders of a majority of the Securities may not
resell the Exchange Securities to be acquired by them in the Exchange Offer to
the public without restriction under the Securities Act (other than the delivery
of the Prospectus included in the Exchange Offer Registration Statement), then
the Company shall, at its cost, use its best efforts to cause to be filed as
promptly as practicable after such determination or date, as the case may be,
and, in any event, prior to the later of (A) 120 days after the Issue Date or
(B) 30 days after such filing obligation arises and use its best efforts to
cause the Shelf Registration Statement to be declared effective by the SEC on or
prior to 60 days after such obligation arises; provided, however, that if the
Company has not consummated the Exchange Offer within 180 days of the Issue
Date, then the Company will file with the SEC on or prior to the 181st day after
the Issue Date, a Shelf Registration Statement providing for the sale by the
Holders of all of the Registrable Securities, and shall use its best efforts to
<PAGE>
-11-
have such Shelf Registration Statement declared effective by the SEC as soon as
practicable. No Holder of Registrable Securities may include any of its
Registrable Securities in any Shelf Registration pursuant to this Agreement
unless and until such Holder furnishes to the Company in writing, within 15 days
after receipt of a request therefor, such information as the Company may, after
conferring with counsel with regard to information relating to Holders that
would be required by the SEC to be included in such Shelf Registration Statement
or Prospectus included therein, reasonably request for inclusion in any Shelf
Registration Statement or Prospectus included therein. Each Holder as to which
any Shelf Registration is being effected agrees to furnish to the Company all
information with respect to such Holder necessary to make any information
previously furnished to the Company by such Holder not materially misleading.
The Company agrees to use its best efforts to keep the Shelf
Registration Statement continuously effective for a period of two years from the
Issue Date (subject to extension pursuant to the last paragraph of Section 3
hereof) (or such shorter period that will terminate when all of the Registrable
Securities covered by such Shelf Registration Statement have been sold pursuant
thereto) or cease to be outstanding (the "Effectiveness Period"); provided,
--------------------
however, that if such Shelf Registration Statement has been filed solely at the
request of any Initial Purchasers pursuant to clause (iv) above, the Company
shall only be required to use its best efforts to keep such Shelf Registration
Statement continuously effective for a period of one year from the Issue Date
(subject to extension pursuant to the last paragraph of Section 3 hereof) or for
such shorter period which will terminate when all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement or cease to be outstanding. The Company shall not permit
any securities other than Registrable Securities to be included in the Shelf
Registration. The Company further agrees, if necessary, to supplement or amend
the Shelf Registration Statement, if required by the rules, regulations or
instructions applicable to the registration form used by the Company for such
Shelf Registration Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registrations, and the Company agrees to
furnish to the Holders of Registrable Securities copies of any such supplement
or amendment promptly after its being used or filed with the SEC.
(c) Expenses. The Company shall pay all Registration Expenses in
--------
connection with the registration pursuant to
<PAGE>
-12-
Section 2(a) or 2(b) hereof and the reasonable fees and expenses of one counsel,
if any, designated in writing by the Majority Holders to act as counsel for the
Holders of the Registrable Securities in connection with a Shelf Registration
Statement. Except as provided in the preceding sentence, each Holder shall pay
all expenses of its counsel, underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. An Exchange Offer Registration
--------------------------------
Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement
pursuant to Section 2(b) hereof will not be deemed to have become effective
unless it has been declared effective by the SEC; provided, however, that if,
after it has been declared effective, the offering of Registrable Securities
pursuant to a Shelf Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Registration Statement will be deemed not to have been
effective during the period of such interference, until the offering of
Registrable Securities may legally resume. The Company will be deemed not to
have used its best efforts to cause the Exchange Offer Registration Statement or
the Shelf Registration Statement, as the case may be, to become, or to remain,
effective during the requisite period if it voluntarily takes any action that
would result in any such Registration Statement not being declared effective or
in the Holders of Registrable Securities covered thereby not being able to
exchange or offer and sell such Registrable Securities during that period,
unless such action is required by applicable law or unless such action is taken
by the Company in good faith and for valid business reasons, including the
acquisition or divestiture of assets, so long as the Company promptly thereafter
complies with the requirements of Section 3(b) hereof, if applicable.
(e) Additional Interest. In the event that (i) the applicable
-------------------
Registration Statement is not filed with the SEC on or prior to the date
specified herein for such filing, (ii) the applicable Registration Statement is
not declared effective on or prior to the date specified herein for such
effectiveness after such obligation arises (the "Effectiveness Target Date"),
-------------------------
(iii) if the Exchange Offer is required to be consummated hereunder, the Company
fails to consummate the Exchange Offer within 30 Business Days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) the applicable Registration Statement is filed and declared
effective prior to the Effectiveness Target Date but
<PAGE>
-13-
shall thereafter cease to be effective or usable without being succeeded
immediately by an additional Registration Statement covering the Registrable
Securities which has been filed and declared effective (each such event referred
to in clauses (i) through (iv), a "Registration Default"), then the interest
--------------------
rate on the Registrable Securities as to which such Registration Default relates
will increase ("Additional Interest"), with respect to the first 90-day period
-------------------
(or portion thereof) while a Registration Default is continuing immediately
following the occurrence of such Registration Default, in an amount equal to
0.25% per annum of the principal amount of the Securities. The rate of
additional Interest will increase by an additional 0.25% per annum of the
principal amount of the Securities for each subsequent 90-day period (or portion
thereof) while a Registration Default is continuing until all Registration
Defaults have been cured, up to an aggregate maximum increase in the interest
rate of 1.00% per annum of the principal amount of the Securities. Additional
Interest shall be computed based on the actual number of days elapsed during
which any such Registration Defaults exist. Following the cure of a Registration
Default, the accrual of Additional Interest with respect to such Registration
Default will cease and the interest will revert to the original rate.
The Company shall notify the Trustee within three Business Days after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Additional Interest shall be
----------
paid in arrears by depositing with the Trustee, in trust, for the benefit of the
Holders of Registrable Securities, on or before the applicable semiannual
interest payment date, immediately available funds in sums sufficient to pay the
Additional Interest then due. The Additional Interest due shall be payable in
arrears on each interest payment date to the record Holder of Securities
entitled to receive the interest payment to be paid on such date as set forth in
the Indenture. Each obligation to pay Additional Interest shall be deemed to
accrue from and including the day following the applicable Event Date.
(f) Specific Enforcement. Without limiting the remedies available to
--------------------
the Initial Purchasers and the Holders, the Company acknowledges that any
failure by the Company to comply with its obligations under Section 2(a) and
Section 2(b) hereof may result in material irreparable injury to the Initial
Purchasers or the Holders for which there is no adequate remedy at law, that it
would not be possible to measure damages for such injuries precisely and that,
in the event of any such failure, the Initial Purchasers or any Holder may
obtain such
<PAGE>
-14-
relief as may be required to specifically enforce the Company's obligations
under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the obligations of
-----------------------
the Company with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement or
Registration Statements as prescribed by Sections 2(a) and 2(b) hereof
within the relevant time period specified in Section 2 hereof on the
appropriate form under the Securities Act, which form (i) shall be selected
by the Company, (ii) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Securities by the selling Holders
thereof and (iii) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith; and use its best efforts to
cause such Registration Statement to become effective and remain effective
in accordance with Section 2 hereof. The Company shall not file any
Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders must provide information for
inclusion therein without the Holders being afforded an opportunity to
review such documentation a reasonable time prior to the filing of such
document or if the Majority Holders or such Participating Broker-Dealer, as
the case may be, their counsel or the managing underwriters, if any, shall
reasonably object by written notice to the Company within three Business
Days after receipt of such documentation;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the Effectiveness Period or the
Applicable Period, as the case may be; and cause each Prospectus to be
supplemented by any required prospectus supplement and as so supplemented
to be filed pursuant to Rule 424 (or any similar provision then in force)
under the Securities Act, and comply with the provisions of the Securities
Act, the Exchange Act and the rules and regulations promulgated thereunder
applicable to it with respect to the disposition of all securities covered
by each Registration Statement during the Effectiveness Period or the
Applicable Period, as the case may be, in accordance with the intended
method or methods of distribution by the
<PAGE>
-15-
selling Holders thereof described in this Agreement (including sales by any
Participating Broker-Dealer);
(c) in the case of a Shelf Registration, (i) furnish to each Holder
of Registrable Securities, without charge, as many copies of each
Prospectus, and any amendment or supplement thereto and such other
documents as such Holder may reasonably request, in order to facilitate the
disposition of the Registrable Securities and (ii) subject to the last
paragraph of Section 3 hereof, hereby consent to the use of the Prospectus
or any amendment or supplement thereto by each of the selling Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by such Prospectus or any amendment or
supplement thereto subject to the limitations on the use thereof provided
in Sections 2(b) and 2(c);
(d) in the case of a Shelf Registration, use its best efforts to
register or qualify, as may be required by applicable law, the Registrable
Securities under all applicable state securities or "blue sky" laws of such
jurisdictions by the time the applicable Registration Statement is declared
effective by the SEC as any Holder of Registrable Securities covered by a
Registration Statement shall reasonably request in advance of such date of
effectiveness, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition in each such jurisdiction of such Registrable Securities owned
by such Holder; provided, however, that the Company shall not be required
to (i) qualify as a foreign corporation or as a broker or dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (ii) file any general consent to service
of process or (iii) subject itself to taxation in any such jurisdiction if
it is not so subject;
(e) in the case of (1) a Shelf Registration or (2) Participating
Broker-Dealers who have notified the Company that they will be utilizing
the Prospectus contained in the Exchange Offer Registration Statement as
provided in Section 3(s) hereof, notify each Holder of Registrable
Securities, or such Participating Broker-Dealers, as the case may be, their
counsel, if any, promptly and if requested by such Holder or Participating
Broker-Dealer confirm such notice in writing (i) when a Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become
<PAGE>
-16-
effective, (ii) of any request by the SEC or any state securities authority
for amendments and supplements to a Registration Statement or Prospectus or
for additional information after the Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose, (iv) if
the Company receives any notification with respect to the suspension of the
qualification of the Registrable Securities or the Exchange Securities to
be sold by any Participating Broker-Dealer for offer or sale in any
jurisdiction or the initiation of any proceeding for such purpose, (v) of
the happening of any event or the failure of any event to occur or the
discovery of any facts or otherwise, during the period a Shelf Registration
Statement is effective which makes any statement made in such Registration
Statement or the related Prospectus untrue in any material respect or which
causes such Registration Statement or Prospectus to omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and (vi) the
Company's reasonable determination that a post-effective amendment to the
Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement as soon as
practicable;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, without charge, at least one conformed copy of each
Registration Statement relating to such Shelf Registration and any post-
effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing
Securities covered by such Shelf Registration to be sold and relating to
the subsequent transfer of such Securities; and cause such Registrable
Securities to be in such denominations (consistent with the provisions of
the Indenture) and registered in such names as the selling Holders may
reasonably request at least two Business Days prior to the closing of any
sale of Registrable Securities;
<PAGE>
-17-
(i) in the case of a Shelf Registration or an Exchange Offer
Registration, upon the occurrence of any circumstance contemplated by
Section 3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v) or 3(e)(vi) hereof, use its
best efforts to prepare a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and to notify each Holder to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an
event, and each Holder hereby agrees to suspend use of the Prospectus until
the Company has amended or supplemented the Prospectus to correct such
misstatement or omission;
(j) obtain a CUSIP number for all Exchange Securities or Registrable
Securities, as the case may be, not later than the effective date of a
Registration Statement, and provide the Trustee with certificates for the
Exchange Securities or the Registrable Securities, as the case may be, in a
form eligible for deposit with the Depositary;
(k) cause the Indenture to be qualified under the Trust Indenture Act
of 1939, as amended, (the "TIA") in connection with the registration of the
---
Exchange Securities or Registrable Securities, as the case may be,
cooperate with the Trustee and the Holders to effect such changes to the
Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the TIA and execute, and use its best efforts
to cause the Trustee to execute, all documents as may be required to effect
such changes, and all other forms and documents required to be filed with
the SEC to enable the Indenture to be so qualified in a timely manner;
(l) in the case of a Shelf Registration, enter into such agreements
and take all such other appropriate actions as are reasonably requested in
order to expedite or facilitate the registration or the disposition of such
Registrable Securities, and in such connection, (i) make such
representations and warranties to Holders of such Registrable Securities
with respect to the business of the Company and its subsidiaries as then
conducted and the Registration Statement, Prospectus and documents, if any,
<PAGE>
-18-
incorporated or deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when requested; (ii) obtain opinions
of counsel to the Company and updates thereof in form and substance
reasonably satisfactory to the Holders of a majority in principal amount of
the Registrable Securities covered by such Registration Statement,
addressed to each selling Holder covering the matters customarily covered
in opinions requested in underwritten offerings and such other matters as
may be reasonably requested by such Holders; (iii) obtain "cold comfort"
letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to the Company and the selling Holders of Registrable
Securities (other than Participating Broker-Dealers, unless such
Participating Broker-Dealers would be deemed to be "underwriters" as a
result of the sale of Securities covered by such Shelf Registration
Statement), such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by
such selling Holders; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no
less favorable than those set forth in Section 4 hereof (or such other
provisions and procedures acceptable to the Company and the Holders of a
majority in aggregate principal amount of Registrable Securities covered by
such Registration Statement) with respect to all parties to be indemnified
pursuant to said Section (including, without limitation, such selling
Holders). The above shall be done at each closing in respect of the sale of
Registrable Securities, or as and to the extent required thereunder;
(m) if (1) a Shelf Registration is filed pursuant to Section 2(b) or
(2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2(a) is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, make available for
inspection by each such person who would be an "underwriter" as a result of
either (i) the sale by such person of Securities covered by such Shelf
Registra-
<PAGE>
-19-
tion Statement or (ii) the sale during the Applicable Period by a
Participating Broker-Dealer of Exchange Securities (provided that a
Participating Broker-Dealer shall not be deemed to be an underwriter solely
as a result of it being required to deliver a prospectus in connection with
any resale of Exchange Securities) and any attorney, accountant or other
agent retained by any such person (collectively, the "Inspectors"), at the
----------
offices where normally kept, during reasonable business hours, all
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries (collectively, the "Records") as shall
-------
be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees
of the Company and its subsidiaries to supply all information in each case
reasonably requested by any such Inspector in connection with such
Registration Statement. Records which the Company determines, in good
faith, to be confidential and any Records which it notifies the Inspectors
are confidential shall not be disclosed by the Inspectors to any other
Person unless (i) the disclosure of such Records is necessary to avoid or
correct a material misstatement or omission in such Registration Statement,
(ii) the release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) the information in
such Records has been made generally available to the public through no
fault or action of any selling Holder of such Registrable Securities, any
such Participating Broker-Dealer or any Inspector. Each such Holder and
each such Participating Broker-Dealer will be required to agree that
information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company unless and until such is made
generally available to the public through no fault or action of such
Holder, such Participating Broker-Dealer or any Inspector. Each selling
Holder of such Registrable Securities and each such Participating Broker-
Dealer will be required to further agree that it will, upon learning that
disclosure of such Records is necessary under (i) or (ii) above, give
notice to the Company and allow the Company at its expense to undertake
appropriate action to prevent disclosure of the Records deemed
confidential;
(n) comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements
satisfying the provisions of
<PAGE>
-20-
Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar
rule promulgated under the Securities Act) no later than 45 days after the
end of any 12-month period (or 90 days after the end of any 12-month period
if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month periods;
(o) upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company addressed to the Trustee for
the benefit of all Holders of Registrable Securities participating in the
Exchange Offer or the Private Exchange, as the case may be, and which
includes an opinion that (i) the Company has duly authorized, executed and
delivered the Exchange Securities and Private Exchange Securities, and (ii)
each of the Exchange Securities or the Private Exchange Securities, as the
case may be, constitute a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its respective
terms (in each case, with customary exceptions);
(p) if an Exchange Offer or a Private Exchange is to be consummated,
upon proper delivery of the Registrable Securities by Holders to the
Company (or to such other Person as directed by the Company) in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
may be, the Company shall mark, or cause to be marked, on such Registrable
Securities and on the books of the Trustee, the Note Registrar (as defined
in the Indenture) and, if necessary, the Depositary, delivered by such
Holders that such Registrable Securities are being canceled in exchange for
the Exchange Securities or the Private Exchange Securities, as the case may
be; but in no event shall such Registrable Securities be marked as paid or
otherwise satisfied solely as a result of being exchanged for Exchange
Securities or Private Exchange Securities in the Exchange Offer or the
Private Exchange, as the case may be;
(q) cooperate with each seller of Registrable Securities covered by
any Registration Statement participating in the disposition of such
Registrable Securities and one
<PAGE>
-21-
counsel acting on behalf of all such sellers in connection with the
filings, if any, required to be made with the NASD;
(r) use its best efforts to take all other steps necessary to effect
the registration of the Registrable Securities covered by a Registration
Statement contemplated hereby; and
(s) (A) in the case of the Exchange Offer Registration Statement (i)
include in the Exchange Offer Registration Statement a section entitled
"Plan of Distribution," which section shall be reasonably acceptable to
Merrill Lynch, as representative of the Initial Purchasers, and which shall
contain a summary statement of the positions taken or policies made by the
staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer (a "Participating Broker-Dealer") that holds Registrable
---------------------------
Securities acquired for its own account as a result of market-making
activities or other trading activities and that will be the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Securities to be received by such broker-dealer in the Exchange Offer,
whether such positions or policies have been publicly disseminated by the
staff of the SEC or such positions or policies, in the reasonable judgment
of Merrill Lynch, as representative of the Initial Purchasers or such other
representative, represent the prevailing views of the staff of the SEC,
including a statement that any such Participating Broker-Dealer who
receives Exchange Securities for Registrable Securities pursuant to the
Exchange Offer may be deemed a statutory underwriter and must deliver a
prospectus meeting the requirements of the Securities Act in connection
with any resale of such Exchange Securities, (ii) furnish to each
Participating Broker-Dealer who has delivered to the Company the notice
referred to in Section 3(e), without charge, as many copies of each
Prospectus included in the Exchange Offer Registration Statement, and any
amendment or supplement thereto, as such Participating Broker-Dealer may
reasonably request; (iii) hereby consent to the use of the Prospectus
forming part of the Exchange Offer Registration Statement or any amendment
or supplement thereto, by any Person subject to the prospectus delivery
requirements of the SEC, including all Participating Broker-Dealers, in
connection with the sale or transfer of the Exchange Securities covered by
the Prospectus or any amendment or supplement thereto, (iv) use its best
efforts to keep the Exchange Offer Registration Statement
<PAGE>
-22-
effective and to amend and supplement the Prospectus contained therein in
order to permit such Prospectus to be lawfully delivered by all Persons
subject to the prospectus delivery requirements of the Securities Act for
such period of time as such Persons must comply with such requirements in
order to resell the Exchange Securities; provided, however, that such
period shall not be required to exceed 90 days (or such longer period if
extended pursuant to the last sentence of Section 3 hereof) (the
"Applicable Period"), and (iv) include in the transmittal letter or similar
-----------------
documentation to be executed by an exchange offeree in order to participate
in the Exchange Offer (x) the following provision:
"If the exchange offeree is a broker-dealer holding
Registrable Securities acquired for its own account as a
result of market-making activities or other trading
activities, it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any
resale of Exchange Securities received in respect of such
Registrable Securities pursuant to the Exchange Offer";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by delivering a Prospectus in
connection with the exchange of Registrable Securities, such broker-dealer
will not be deemed to admit that it is an underwriter within the meaning of
the Securities Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Company agrees to deliver, upon request, to the Trustee and to
Participating Broker-Dealers who have delivered to the Company the notice
referred to in Section 3(e) upon consummation of the Exchange Offer (i) an
opinion of counsel substantially in the form attached hereto as Exhibit A,
and (ii) an officers' certificate containing certifications substantially
similar to those set forth in Section 5(c) of the Purchase Agreement.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the proposed distribution of such
Registrable Securities, as the Company may from time to time reasonably request
in writing. The Company may exclude from such registration the Registrable
Securities of any seller who fails to furnish such
<PAGE>
-23-
information within a reasonable time (not to exceed 10 Business Days) after
receiving such request and shall be under no obligation to compensate any such
seller for any lost income, interest or other opportunity forgone, or any
liability incurred, as a result of the Company's decision to exclude such
seller.
In the case of (1) a Shelf Registration Statement or (2) Participating
Broker-Dealers who have notified the Company that they will be utilizing the
Prospectus contained in the Exchange Offer Registration Statement as provided in
Section 3(s) hereof, that are seeking to sell Exchange Securities and are
required to deliver Prospectuses, each Holder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v) or 3(e)(vi) hereof, such Holder
will forthwith discontinue disposition of Registrable Securities pursuant to a
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof or until
it is advised in writing (the "Advice") by the Company that the use of the
------
applicable Prospectus may be resumed, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies in such
Holder's possession, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Securities or Exchange
Securities, as the case may be, current at the time of receipt of such notice.
If the Company shall give any such notice to suspend the disposition of
Registrable Securities or Exchange Securities, as the case may be, pursuant to a
Registration Statement, the Company shall use its best efforts to file and have
declared effective (if an amendment) as soon as practicable an amendment or
supplement to the Registration Statement and, in the case of an amendment, have
such amendment declared effective as soon as practicable and shall extend the
period during which such Registration Statement shall be maintained effective
pursuant to this Agreement by the number of days in the period from and
including the date of the giving of such notice to and including the date when
the Company shall have made available to the Holders (x) copies of the
supplemented or amended Prospectus necessary to resume such dispositions or (y)
the Advice.
4. Indemnification and Contribution. (a) The Company shall
--------------------------------
indemnify and hold harmless each Initial Purchaser, each Holder, each
Participating Broker-Dealer, each underwriter who participates in an offering of
Registrable Securities, their respective affiliates, each Person, if any, who
controls any of
<PAGE>
-24-
such parties within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment or supplement thereto), covering
Registrable Securities or Exchange Securities, including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any court or governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission; provided
that (subject to Sections 4(c) and 4(d) below) any such settlement is
effected with the prior written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred (including
reasonable fees and disbursements of one counsel chosen as provided in
Section 4(c) below) reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
court or governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (i) or (ii) of this Section 4(a);
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission (i) made in reliance upon and
in conformity with written information furnished in writing to the Company by
<PAGE>
-25-
or on behalf of such Initial Purchaser, such Holder, such Participating Broker-
Dealer or any underwriter with respect to such Initial Purchaser, Holder,
Participating Broker-Dealer or underwriter, as the case may be, expressly for
use in the Registration Statement (or any amendment or supplement thereto) or
any Prospectus (or any amendment or supplement thereto) or (ii) contained in any
preliminary Prospectus or the final Prospectus if such Initial Purchaser, such
Holder, such Participating Broker-Dealer or such underwriter failed to send or
deliver a copy of the final Prospectus (or any amendment or supplement thereto)
to the Person asserting such losses, claims, damages or liabilities on or prior
to the delivery of written confirmation of any sale of securities covered
thereby to such Person in any case where the Company shall have previously
furnished copies thereof to such Initial Purchaser, such Holder, such
Participating Broker-Dealer or such underwriter, as the case may be, in
accordance with this Agreement, at or prior to the written confirmation of the
sale of such Securities to such Person and the untrue statement contained in or
the omission from the preliminary Prospectus or the final Prospectus was
corrected in the final Prospectus (or any amendment or supplement thereto). Any
amounts advanced by the Company to an indemnified party pursuant to this Section
4 as a result of such losses shall be returned to the Company if it shall be
finally determined by a court of competent jurisdiction in a judgment not
subject to appeal or final review that such indemnified party was not entitled
to indemnification by the Company.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, each of its officers who signs any Registration
Statement, each Initial Purchaser, each underwriter who participates in an
offering of registrable Securities and the other selling Holders and each of
their respective directors and each Person, if any, who controls any of the
Company, the Initial Purchasers, any underwriter or any other selling Holder
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
against any and all loss, liability, claim, damage and expense whatsoever
described in the indemnity contained in Section 4(a) hereof, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any amendment or
supplement thereto) or any Prospectus (or any amendment or supplement thereto)
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such selling Holder with respect to such Holder
expressly for use in the Registration Statement (or any supplement thereto), or
any such Prospectus (or any amendment thereto); provided, however, that,
<PAGE>
-26-
in the case of the Shelf Registration Statement, no such Holder shall be liable
for any claims hereunder in excess of the amount of net proceeds received by
such Holder from the sale of Registrable Securities pursuant to the Shelf
Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. In the case of
parties indemnified pursuant to Section 4(a) above, one counsel to all the
indemnified parties shall be selected by Merrill Lynch, and, in the case of
parties indemnified pursuant to Section 4(b) above, counsel to all the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party.
Notwithstanding the foregoing, if it so elects within a reasonable time after
receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the indemnified parties
defendant in such action (which approval shall not be unreasonably withheld),
unless such indemnified parties reasonably object to such assumption on the
ground that there may be legal defenses available to them which are different
from or in addition to those available to such indemnifying party. If an
indemnifying party assumes the defense of such action, the indemnifying parties
shall not be liable for any fees and expenses of counsel for the indemnified
parties incurred thereafter in connection with such action. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contri-
<PAGE>
-27-
bution is sought under this Section 4, unless such settlement, compromise or
consent (i) includes a full and unconditional release of each indemnified party
from all liability arising out of such litigation, investigation, proceeding or
claim and the offer and sale of any Securities and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel pursuant to Section 4(a)(iii) above, then such indemnifying
party agrees that it shall liable for any settlement of the nature contemplated
by Section 4(a)(ii) effected without its written consent if (i) such settlement
is entered into more than 45 days after receipt by such indemnifying party of
the aforesaid request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company, the Initial
Purchasers and the Holders, as applicable, shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by
such indemnity agreement incurred by the Company, the Initial Purchasers and the
Holders; provided, however, that no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person that was not guilty of such
fraudulent misrepresentation. As between the Company and the Initial Purchasers
and the Holders, such parties shall contribute to such aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement in such proportion as shall be appropriate to reflect the
relative fault of the Company, on the one hand, and of the Holder of Registrable
Securities, the Participating Broker-Dealer or Initial Purchasers, as the case
may be, on the other hand, in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations.
<PAGE>
-28-
The relative fault of the Company, on the one hand, and the Holder of
Registrable Securities, the Participating Broker-Dealer or the Initial
Purchasers, as the case may be, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, or by the Holder of Registrable
Securities, the Participating Broker-Dealer or the Initial Purchasers, as the
case may be, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Holders of the Registrable Securities and the
Initial Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 4 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 4.
For purposes of this Section 4, each affiliate of any Person, if any,
who controls a Holder of Registrable Securities, a Initial Purchaser or a
Participating Broker-Dealer within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as such other Person, and each director of the Company, each affiliate of the
Company, each executive officer of the Company who signed the Registration
Statement, and each Person, if any, who controls any Issuer within the meaning
of Section 15 of the Securities act or Section 20 of the Exchange Act shall have
the same rights to contribution as the Company.
5. Participation in Underwritten Registrations. No Holder may
-------------------------------------------
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements. The
Company shall be under no obligation to compensate any Holder for lost income,
interest or other opportunity foregone, or other liability incurred, as a result
of the Company's decision to exclude such Holder from any underwritten
registration if such Holder has not complied with the provisions of this Section
5 in all material respects following 10 business days' written
<PAGE>
-29-
notice of non-compliance and the Company's decision to exclude such Holder.
6. Selection of Underwriters. The Holders of Registrable Securities
-------------------------
covered by the Shelf Registration Statement who desire to do so may sell the
securities covered by such Shelf Registration in an underwritten offering. In
any such underwritten offering, the underwriter or underwriters and manager or
managers that will administer the offering will be selected by the Holders of a
majority in aggregate principal amount of the Registrable Securities covered by
the Shelf Registration Statement; provided, however, that such underwriters and
managers must be reasonably satisfactory to the Company.
7. Miscellaneous.
-------------
(a) Rule 144 and Rule 144A. So long as any of the Registrable
----------------------
Securities are outstanding, the Company will file with the Commission, to the
extent then permitted by the Commission, the annual reports, quarterly reports
and other documents that the Company would have been required to file with the
Commission pursuant to Sections 13(a) and 15(d) of the Exchange Act if the
Company was subject to such Sections, and the Company will promptly provide to
the Trustee copies of such reports and documents; provided, however, that if the
Company is for any reason unable to make such filings it will make available,
upon request, to any Holder of Registrable Securities or prospective purchaser
of Registrable Securities the information specified in Rule 144A(d)(4) of the
Securities Act.
(b) No Inconsistent Agreements. The rights granted to the Holders
--------------------------
hereunder do not, and will not for the term of this Agreement in any way
conflict with and are not, and will not during the term of this Agreement be
inconsistent with the rights granted to the holders of the Company's other
issued and outstanding securities under any other agreements entered into by the
Company.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the Company
and the Majority Holders; provided, however, that no amendment, modification, or
supplement or waiver or consent to the departure with respect to the provisions
of Section 4 hereof shall be effective as against any Holder of Registrable
Securities or any
<PAGE>
-30-
the Company unless consented to in writing by such Holder of Registrable
Securities or the Company, as the case may be.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, facsimile, or any courier guaranteeing overnight delivery (i) if to
a Holder, at the most current address given by such Holder to the Company by
means of a notice given in accordance with the provisions of this Section 7(d),
which address initially is, with respect to the Initial Purchasers, the address
set forth in the Purchase Agreement; and (ii) if to the Company, initially at
the Company's address set forth in the Purchase Agreement and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 7(d).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
is confirmed, if sent by facsimile; and on the next Business Day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors, assigns and transferees of the
Initial Purchasers, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, however, that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms of the Purchase Agreement or
the Indenture. If any transferee of any Holder shall acquire Registrable
Securities, in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities, such Person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof.
(f) Third Party Beneficiary. Each of the Initial Purchasers and each
-----------------------
Holder shall be a third party beneficiary
<PAGE>
-31-
of the agreements made hereunder between the Company, on the one hand, and the
Initial Purchasers, on the other hand, and shall have the right to enforce such
agreements directly to the extent it deems such enforcement necessary or
advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. All specified times of day refer
to New York City time.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Securities Held by the Company or any of its Affiliates. Whenever
-------------------------------------------------------
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
any of its affiliates (as such term is defined in Rule 405 under the Securities
Act) shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
(l) Subsidiary Guarantor a Party. Immediately upon the designation of
----------------------------
any Subsidiary of the Company as a Guarantor (as defined in the Indenture), the
Company shall cause such Subsidiary to become a party hereto as a Subsidiary
Guarantor by executing and delivering to the Initial Purchasers a counterpart
hereof.
<PAGE>
S-1
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE GSI GROUP, INC.
By: /s/ John W. Funk
-----------------------------------------
Name: John W. Funk
Title: Executive V.P, CFO and Secretary
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Joseph B. Sheehan
-----------------------------
Name: Joseph B. Sheehan
Title: Vice President
<PAGE>
S-2
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DAVID MANUFACTURING CO.
By: /s/ Russ C. Mello
-------------------------------------
Name: Russ C. Mello
Title: Asst. Treasurer
<PAGE>
Exhibit A
---------
Form of Opinion of Counsel
--------------------------
1. Each of the Exchange Offer Registration Statement and the
Prospectus (other than the financial statements, notes or schedules thereto and
other financial and statistical information and supplemental schedules included
or referred to therein or omitted therefrom and the Form T-1, as to which such
counsel need express no opinion), complies as to form in all material respects
with the applicable requirements of the Securities Act and the applicable rules
and regulations promulgated under the Securities Act.
2. We have participated in conferences with officers and other
representatives of the Company, your representatives and representatives of the
independent accountants for the Company at which conferences the contents of the
Exchange Offer Registration Statement and related matters were discussed.
However we do not express an opinion with respect to, and do not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Exchange Offer Registration Statement or make any
representation that we have independently verified or checked the accuracy,
completeness or fairness of such statements. On the basis of and subject to
the foregoing, we advise you that nothing has come to our attention that has led
us to believe that the Prospectus, as of its date or as of the date hereof,
included or includes an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading (it
being understood that we express no belief with respect to the financial
statements, including the notes thereto, or any other financial or statistical
data set forth or referred to in the Exchange Offer Registration Statement).
<PAGE>
EXHIBIT 4.5
The Registrant has other long-term debt agreements. The total amount of
indebtedness under any one of these agreements does not exceed 5 percent of the
total assets of the Registrant and its subsidiaries on a consolidated basis. The
Registrant hereby agrees to furnish a copy of any such agreement to the
Commission promptly upon receipt of a written request from the Commission.
<PAGE>
Exhibit 10.1
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
-------------------------------------------------------
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated as of
November 5, 1997, is entered into by and between THE GSI GROUP, INC., a Delaware
corporation (the "Borrower"), and LASALLE NATIONAL BANK (the "Bank").
WITNESSETH:
WHEREAS, the Borrower and the Bank are party to a Loan and Security
Agreement dated April 26, 1995 (as amended and restated as of June 6, 1996, and
as further amended prior to the date hereof, the "Original Loan Agreement"); and
WHEREAS, the Borrower and the Bank desire to amend and restate the Original
Loan Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises, the mutual agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby amend and
restate the Original Loan Agreement to provide as follows:
ARTICLE I. DEFINITIONS.
1.01 The following words and phrases, as used herein, shall have the
following respective meanings:
"Accounts" shall mean any and all accounts, contract rights, notes, drafts,
chattel paper, instruments, documents and general intangibles consisting of
rights to payment (all as defined in the UCC).
"Account Debtor" shall mean any party who is obligated on any Account.
"Acquisition" shall mean any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other business combination with another Person (other than
a Person that is a Subsidiary).
<PAGE>
"Adjusted LIBOR Rate" shall mean a rate per annum determined pursuant to
the following formula:
Adjusted LIBOR Rate = LIBOR
---------------------------
100% - Reserve Percentage
"Affiliate" shall mean any Person which, directly or indirectly, owns or
controls, on an aggregate basis, including all beneficial ownership and
ownership or control as a trustee, guardian or other fiduciary, Stock having
ordinary voting power to elect a majority of the board of directors
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation have or might have voting power by reason of the happening of
any contingency) of the Borrower, or which controls, is controlled by or is
under common control with the Borrower or any stockholders of the Borrower. For
purposes hereof, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of management and policies, whether
through the ownership of voting securities, by contract or otherwise.
"Applicable Margin" shall mean with respect to Euro-Dollar Loans and the
Facility Fee, the rate per annum determined as set forth below:
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin
Funded Debt to EBITDA Ratio for Euro-Dollar Loans for Facility Fee
- --------------------------- --------------------- -------------------
Greater than And Less
or equal to than
- ----------- --------
<S> <C> <C> <C>
4.00 to 1 1.45% .30%
3.50 to 1 3.99 to 1 1.25% .25%
3.00 to 1 3.49 to 1 1.00% .25%
2.50 to 1 2.99 to 1 0.75% .25%
2.49 to 1 0.55% .20%
</TABLE>
provided that for the period from November 5, 1997 through the date the Bank
receives the Borrower's compliance certificate for the fiscal quarter ending
December 31, 1997, the Applicable Margin for Euro-Dollar Loans shall be 1.25%
and the Applicable Margin for the Facility Fee shall be .25%. Any change in the
Applicable Margin for Euro-Dollar Loans and the Facility Fee due to a change in
the Borrower's Debt to EBITDA Ratio shall take place upon receipt by the Bank of
the compliance certificate indicating such change in the Debt to EBITDA Ratio.
For purposes of this definition (a) Debt shall be measured as at the end of the
most recent fiscal quarter of the Borrower and (b) EBITDA shall be measured as
at the end of the most recent fiscal quarter of the Borrower for the four-
fiscal-quarter period then ended.
2
<PAGE>
"Authorized Borrower Representative" shall mean any officer of Borrower
designated as such by resolution of the Board of Directors of the Borrower from
time to time, a certified copy of which resolution shall be delivered to the
Bank.
"Bank" shall mean LaSalle National Bank, a national banking association.
"Borrower" shall mean The GSI Group, Inc., a Delaware corporation.
"Business Day" shall mean any day, other than a Saturday or Sunday, on
which commercial banks are open for domestic business in Chicago, Illinois.
"Capital Expenditures" shall mean, for the period of four (4) consecutive
fiscal quarters most recently ended on or prior to the date of determination,
Borrower's capital expenditures (including capital lease expense), determined in
accordance with GAAP.
"Closing" shall have the meaning specified in Section 3.01.
"Collateral" shall have the meaning specified in Section 4.01.
"Debt" shall mean, with respect to the subject Person, all items of
indebtedness, obligation or liability, whether matured or unmatured, liquidated
or unliquidated, direct or indirect, or joint or several, including:
(A) All Obligations of such Person;
(B) All indebtedness in effect guaranteed, directly or indirectly, in any
manner, or endorsed (other than for collection or deposit in the ordinary course
of business) or discounted with recourse;
(C) All indebtedness in effect guaranteed, directly or indirectly through
agreements, contingent or otherwise: (1) to purchase such indebtedness, or (2)
to purchase, sell or lease (as lessee or lessor) property, products, materials
or supplies or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such indebtedness or to assure the owner
of the indebtedness against loss, or (3) to supply funds to or in any other
manner invest in any Person;
(D) All indebtedness secured (or for which the holder of such indebtedness
has a right, contingent or otherwise, to be secured) by any mortgage, trust
deed, deed of trust, pledge, lien, security interest or other charge or
encumbrance upon property owned or acquired subject thereto, whether or not the
liabilities secured thereby have been assumed; and
(E) All indebtedness incurred as the lessee of goods or services under
leases that, in accordance with GAAP, are or should be reflected on the lessee's
balance sheet as a capital lease.
3
<PAGE>
"DMC" shall mean David Manufacturing Co., an Iowa corporation whose
headquarters is located in Mason City, Iowa.
"DMC Acquisition Agreement" shall mean the Stock Purchase Agreement between
Borrower and Sellers named therein dated as of October 10, 1997 regarding DMC
and DSC.
"DMC Revolving Credit Loans" shall mean Revolving Credit Loans advanced to
DMC and DSC pursuant to section 2.01 below.
"DMC Revolving Credit Note" shall mean the note of DMC and DSC delivered in
accordance with Section 2.01 below.
"DMC Seller" shall mean selling shareholders executing the DMC Acquisition
Agreement.
"Documents" shall mean this Agreement, the Notes and any other documents,
instruments or certificates to be executed and delivered hereunder or in
connection herewith by or on behalf of the Borrower or any of its Affiliates.
"DSC" shall mean David Service Company, an Iowa corporation whose
headquarters is located in Mason City, Iowa.
"EBITDA" shall mean, for the period of four (4) consecutive fiscal quarters
most recently ended on or prior to the date of determination, Borrower's
earnings before interest, taxes, depreciation and amortization, and
notwithstanding any non-cash charge for increase in value of stock appreciation
rights (or similar rights), but accounting for same as a charge against earnings
when paid, determined in accordance with GAAP. Prior to the first anniversary
of the consummation of an Acquisition, the historical financial results of the
acquired Person or assets for the relevant period will be included for purposes
of calculating EBITDA (but without any adjustment to such historical results for
cost savings or other synergies).
"Environmental Laws" shall mean any federal, state or local law, statute,
ordinance, order, decree, rule or regulation relating to releases, discharges,
emissions or disposals to air, water, land or groundwater, to the withdrawal or
use of groundwater, to the use, handling or disposal of polychlorinated
biphenyls, asbestos or urea formaldehyde, to the treatment, storage, disposal or
management of Hazardous Substances, to exposure to toxic, hazardous or other
controlled, prohibited or regulated substances and to the transportation,
storage, disposal, management or release of gaseous or other liquid substances,
including the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 USC (S)9601 et seq., the Resource, Conservation and Recovery Act of
1976, as amended by the Hazardous Solid Waste Amendments of 1984, 42 USC (S)6901
et seq., the Toxic Substances Control Act, 15 USC (S)2601 et seq., the
Occupational Safety and Health Act of 1970, 29 USC (S)651 et seq., the Clean Air
Act of 1966, as amended, 42 USC (S)7401 et seq., and the Federal Water Pollution
Control Act, as amended by the Clean Water Act
4
<PAGE>
of 1977, 33 USC (S)1251 et seq., and all rules, regulations and guidance
documents promulgated pursuant thereto or published thereunder.
"Equipment" shall mean all equipment, machinery, fixtures and supplies and
any and all parts, accessories, attachments, fittings, special tools, additions
and accessories thereto and any renewals, substitutions or replacements thereof,
including licensed vehicles, plant trucks, furniture, office equipment and minor
plant equipment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean (i) any corporation which is now, or was at
any time, a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Internal Revenue Code) as the Borrower or any
predecessor thereof; (ii) any partnership, trade or business (whether or not
incorporated) which is now, or was at any time, under common control (within the
meaning of Section 414(c) of the Internal Revenue Code) with the Borrower or any
predecessor thereof; and (iii) any entity, which is now, or was at any time, a
member of the same affiliated service group (within the meaning of Section
414(m) of the Internal Revenue Code) as either the Borrower or any predecessor
thereof, or any corporation described in clause (i) or any partnership, trade or
business described in clause (ii).
"Euro-Dollar Business Day" shall mean any day on which commercial banks are
open for domestic and international business (including dealing in dollar
deposits) in London and Chicago.
"Euro-Dollar Lending Office" shall mean as to the Bank such branch or
affiliate of the Bank as it may designate from time to time as its Euro-Dollar
Lending Office.
"Euro-Dollar Loans" shall mean Loans which bear interest at a Euro-Dollar
Rate.
"Euro-Dollar Rate" shall mean, at the time of determination, the Adjusted
LIBOR Rate then in effect plus the Applicable Margin.
"Event of Default" shall have the meaning specified in Section 9.01.
"Facility Fee" shall have the meaning given to it in Section 2.06(B) below.
"Financial Statements" shall mean, at any time, the audited financial
statements of the Borrower for its most recently ended fiscal year, the
unaudited financial statements for the most recently ended accounting period of
the Borrower, and the unaudited pro forma condensed combined balance sheet dated
as of September 30, 1997 contained in the Offering Memorandum, copies of which
have been furnished to the Bank.
"Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of (A)
EBITDA minus Capital Expenditures (to the extent not financed by sources other
than the Bank), in respect
5
<PAGE>
of such period, to (B) Borrower's interest expense plus scheduled debt
amortization including without limitation under the Subordinated Notes (both
determined in accordance with GAAP), in respect of such period.
"Floating Rate" shall mean, at the time of determination, a floating per-
annum rate equal to the Prime Rate then in effect.
"Funded Debt" of any Person shall mean (i) all Debt of such Person for
borrowed money or which has been incurred in connection with the acquisition of
assets in each case having a final maturity or more than one year from the date
of origin thereof (or which is renewable or extendible at the option of the
obligor for a period or periods of more than one year from the date of origin),
including all payments in respect thereof that are required to be made within
one year from the date of any determination of Funded Debt, whether or not the
obligation to make such payments shall constitute a current liability of the
obligor under GAAP, but in any event including the Debt outstanding hereunder
from time to time and under the Subordinated Notes, (ii) all capitalized rentals
of such Person, and (iii) all guaranties by such Person of Funded Debt of
others.
"Funded Debt to EBITDA Ratio" shall mean the ratio of (A) Borrower's total
Funded Debt determined in accordance with GAAP to (B) EBITDA for the period of
four (4) consecutive fiscal quarters most recently ended on or prior to such
date.
"GAAP" shall mean generally accepted accounting principles consistently
applied throughout the period involved; provided, however, that the FIFO method
(rather than LIFO, which is the method applied with respect to Borrower's
audited financial statements) shall be applied with respect to (i) interim
financial statements, and (ii) the calculation of all financial covenants and
compliance with other monetary restrictions in this Agreement; and provided,
further, that so long as Borrower is not legally responsible for obligations to
Larry Sloan in respect of his non-competition agreement, such obligations shall
be disregarded in the calculation of all financial covenants.
"General Intangibles" shall mean all general intangibles, including choses
in action, designs, patents, trademarks, service marks, trade names, good will,
applications for registration, registrations, licenses, franchises, customer
lists, and all other intangible property of every nature (other than Accounts).
"Governmental Authority" shall mean the United States of America, any
state, territory or district thereof, and any other political subdivision or
body politic created pursuant to any applicable Law, and any court, agency,
department, commission, board, bureau or instrumentality of any of the
foregoing.
"Hazardous Substances" shall mean (i) any hazardous or toxic substance,
chemical or waste, or any pollutant or contaminant defined as such in any now or
hereafter existing
6
<PAGE>
Environmental Law, (ii) asbestos, (iii) radon, (iv) petroleum, its derivative
by-products and other hydrocarbons, (v) polychlorinated biphenyls, (vi)
explosives, (vii) radioactive materials and (viii) any additional substances or
materials which at any time are classified or considered to be hazardous or
toxic under any Environmental Laws.
"Indenture" shall mean the Indenture dated as of November 5, 1997 between
the Borrower and LaSalle National Trust, N.A., as trustee, relating to the
Subordinated Notes.
"Interest Period" shall mean with respect to each Euro-Dollar Loan:
(i) initially, the period commencing on the date of such Euro-Dollar Loan
and ending 30, 60 or 90 days thereafter, as the Borrower may elect, or
at any other maturity mutually agreed upon by the Bank and Borrower;
and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period for such Euro-Dollar Loan and ending 30, 60
or 90 days thereafter, as the Borrower may elect or as otherwise
mutually agreed by the Bank and Borrower;
provided that:
- --------
(A) any Interest Period which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day, unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding Euro-
Dollar Business Day;
(B) any Interest Period which begins on the last Euro-Dollar Business Day,
of the calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (C) below, end on the last Euro-Dollar Business Day of
a calendar month;
(C) any Interest Period in respect of a Revolving Credit Loan which begins
prior to the Revolving Credit Loan Termination Date and would otherwise end
after the Revolving Credit Loan Termination Date shall end on such date; and
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Inventory" shall mean all inventory, goods, merchandise and other personal
property held for sale or lease, or furnished or to be furnished under any
contract of service, or held as raw materials, work in process or material used
or consumed, or to be used or consumed, in business.
"Laws" shall mean any federal, state or local law, statute, ordinance,
order, decree, rule or regulation.
7
<PAGE>
"Letter of Credit" shall mean a commercial letter of credit issued pursuant
to the Revolving Credit Loan Commitment.
"Letter of Credit Obligations" shall have the meaning specified in Section
2.01(C).
"Loans" shall mean the Revolving Credit Loans.
"London Interbank Offered Rate" or "LIBOR Rate" applicable to any Interest
Period shall mean the rate per annum (rounded upward, if necessary, to the
nearest 1/16 of 1%) at which deposits in dollars are offered by the Euro-Dollar
Lending Office of the Bank to other prime banks in the London interbank market
at approximately 11:00 A.M. two (2) Euro-Dollar Business Days prior to the first
day of such Interest Period in an amount approximately equal to the aggregate
principal amount of the Euro-Dollar Loan to which such Interest Period is to
apply and for a period of time comparable to such Interest Period.
"Multiemployer Plan" shall have the meaning ascribed to it in Section
4001(a)(3) of ERISA.
"Note" or "Notes" shall mean the Revolving Credit Note and the DMC
Revolving Credit Note.
"Obligations" shall mean, with respect to any Person, all of such Person's
liabilities, obligations and indebtedness to the Bank of any and every kind and
nature, including the Loans, such Person's other liabilities and obligations to
the Bank under this Agreement, such Person's reimbursement obligations in
respect of letters of credit issued for the account of such Person, and such
Person's liabilities and obligations to the Bank under any other agreement,
document or instrument, (including any guaranty of another Person's
Obligations), whether heretofore, now or hereafter owing, arising, due or
payable by or from such Person to the Bank, howsoever evidenced, created,
incurred, acquired or owing, and whether joint, several, primary, secondary,
direct, contingent, fixed or otherwise.
"Offering Memorandum" shall mean that certain Offering Memorandum of
Borrower dated November 5, 1997 regarding the Subordinated Notes.
"Payment Date" means the last day of an Interest Period.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Liens" shall mean:
(A) liens for taxes, assessments or other governmental charges for the
then current year which are not yet due or delinquent;
8
<PAGE>
(B) liens for taxes, assessments or other governmental charges already
due, but the validity of which is being contested at the time in good faith by
appropriate proceedings and for which adequate reserve is maintained in
accordance with GAAP, and as to which no notice or claim of lien has been filed;
(C) statutory liens in favor of landlords, carriers, warehousemen and
other suppliers of services or materials for sums incurred in the ordinary
course of business, provided such sums are not delinquent and do not exceed the
sum of $250,000.00 in the aggregate at any time, and other liens of such type
which have been improperly asserted and which the Borrower is contesting in good
faith;
(D) liens for worker's compensation awards not due or delinquent, and
other liens of such type which have been improperly asserted and which the
Borrower is contesting in good faith;
(E) pledges or deposits to secure obligations under worker's compensation
laws or similar legislation;
(F) deposits to secure public, statutory or insurance-related obligations
of the Person whose assets are subject to such liens;
(G) liens securing purchase money financing for Equipment acquired by
Borrower after the date hereof, provided that (i) each such lien secures only
the purchase price of the Equipment so encumbered thereby, (ii) the aggregate
amount of new financing secured thereby and incurred after the date of this
Agreement does not exceed $500,000.00 in any calendar year, and (iii) neither
the aggregate amount secured by all such liens nor the aggregate value of the
Equipment so encumbered exceeds $2,500,000.00 at any time.
(H) mortgages, pledges, encumbrances, security interests, assignments and
liens listed on Schedule 1, or approved in writing by the Bank subsequent to the
date hereof, mortgages securing only refinancings of the real estate comprising
Borrower's existing facilities in Assumption, Illinois and Paris, Illinois
(provided that the aggregate amount secured does not exceed 75% of the appraised
fair market value of such real estate); and
(I) mortgages, pledges, encumbrances, security interests, assignments or
liens in favor of the Bank.
"Permitted Holders" means J. Craig Sloan, Jorge Andrade, John W. Funk and
Howard G. Buffett or their successors and assigns who are Affiliates of the
Permitted Holders, members of their families and their heirs or executors.
9
<PAGE>
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated association, joint venture, court,
Governmental Authority, or any other similar entity.
"Plan" shall mean any employee benefit plan or other plan for any employees
of the Borrower or any employees of any Subsidiary of the Borrower or any ERISA
Affiliate.
"Prime Rate" shall mean the rate of interest referred to by the Bank from
time to time as its prime rate, as fixed by the management of the Bank for the
guidance of its loan officers, whether or not such rate is otherwise published,
with each change in such prime rate to take effect on the same day as the
determination of each change by the Bank. Such rate is not necessarily the most
favorable rate offered by the Bank to its borrowers.
"Prime Rate Loan" means a Loan which is not a Euro-Dollar Loan.
"Reportable Event" shall mean any of the events described in Section 4043
of ERISA, excluding subsections 4043(b)(2) and (b)(3) thereof.
"Reserve Percentage" shall mean, for the purpose of computing the Adjusted
LIBOR Rate the reserve requirement imposed by the Board of Governors of the
Federal Reserve System (or any successor) under Regulation D on Eurocurrency
liabilities (as such term is defined in Regulation D) for the applicable
Interest Period as of the first day of such Interest Period, but subject to any
amendments of such reserve requirement by such Board or its successor, and
taking into account any transitional adjustments thereto becoming effective
during such Interest Period. For purposes of this definition, Euro-Dollar Loans
shall be deemed to be Eurocurrency liabilities as defined in Regulation D
without benefit of or credit for prorations, exemptions or offsets under
Regulation D.
"Revolving Credit Loan" shall have the meaning specified in Section
2.01(A).
"Revolving Credit Loan Commitment" shall have the meaning specified in
Section 2.01(A).
"Revolving Credit Loan Termination Date" shall have the meaning specified
in Section 2.01(A).
"Revolving Credit Note" shall have the meaning specified in Section
2.01(E).
"Side Letter" shall have the meaning specified in Section 4.08(I)(ii).
"Special Collateral" shall have the meaning specified in Section 4.06.
10
<PAGE>
"Stock" shall mean all shares, options, interests, participations or other
equivalents, howsoever designated, of or in a corporation, partnership or
similar entity, whether voting or nonvoting, including common stock, warrants,
preferred stock, convertible debentures, partnership interests and all
agreements, instruments and documents convertible, in whole or in part, into any
one or more of the foregoing.
"Stockholder Agreements" means each of the Stock Restriction and Buy-Sell
Agreements, made as of June 6, 1996 by and between each of the Permitted Holders
of the Borrower with respect to the Borrower's voting Stock, as amended, and the
Stock Restriction and Buy-Sell Agreement made as of January 1, 1997 among the
Borrower, the Permitted Holders and other persons named therein with respect to
the Borrower's non-voting Stock, as amended.
"Stockholders" shall mean those parties named as the stockholders of the
Borrower on Schedule 5 hereto.
"Stock Redemption Agreement" shall mean, collectively, the three Stock
Redemption Agreements, each dated as of May 21, 1996, each between a Seller and
the Borrower, providing for the redemption of certain of the outstanding Stock
of the Borrower.
"Subordinated Debt" shall mean any Debt of the Borrower which is expressly
subordinated to the Obligations of the Borrower pursuant to the terms of a
written agreement among the Borrower, the Person to whom such Debt is owed and
the Bank, the terms of which are satisfactory to the Bank in all respects;
including without limitation, the Debt evidenced by the Subordinated Notes.
"Subordinated Notes" shall mean the $100,000,000 aggregate principal amount
of 10.25% Senior Subordinated Notes due 2007 issued under the Indenture.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or similar entity of which fifty percent (50%) or more of the
outstanding Stock having ordinary voting power is at the time, directly or
indirectly, owned by such Person and/or one or more of such Person's
Subsidiaries (irrespective of whether, at the time, Stock of any other class or
classes of such entity shall have or might have voting power by reason of the
happening of any contingency).
"Subsidiary Borrowers" shall mean DMC and DSC.
"Supplemental Documentation" means all agreements, instruments, documents,
financing statements, warehouse receipts, schedules of accounts assigned,
mortgages, certificates of title and other written matter necessary or requested
by the Bank to create, evidence, enforce, perfect or maintain perfected the
Bank's security interest in the Collateral and to consummate the transactions
contemplated in or by this Agreement and the other Documents.
11
<PAGE>
"UCC" shall mean the Uniform Commercial Code as in effect in Illinois.
1.02 Except as otherwise specifically indicated herein, all references to
Article, Section and Sub-Section numbers and letters shall refer to Articles,
Sections and Sub-Sections of this Agreement; all references to Exhibits and
Schedules shall refer to the Exhibits and Schedules attached to this Agreement.
The words "hereby", "hereof", "hereto", "herein" and "hereunder" and any similar
terms shall refer to this Agreement as a whole and not to any particular
Article, Section or Sub-Section. The word "hereafter" shall mean after the date
this Agreement is executed and delivered by the parties hereto, and the word
"heretofore" shall mean before such date. Words of the masculine, feminine or
neuter gender shall mean and include the correlative words of other genders, and
words importing the singular number shall mean and include the plural number and
vice versa. The Article headings are inserted in this Agreement for convenience
only and are not intended to, and shall not be construed to limit, enlarge or
affect the scope or intent of this Agreement or the meaning of any provision
hereof.
1.03 Any accounting terms used in this Agreement which are not
specifically defined shall have the meaning customarily given them in accordance
with GAAP; provided, however, that, in the event that changes in generally
accepted accounting principles shall be mandated by the Financial Accounting
Standards Board, or any similar accounting body of comparable standing, or shall
be recommended by the Borrower's certified public accountants, to the extent
that such changes would modify such accounting terms or the interpretation or
computation thereof, such changes shall be followed in defining such accounting
terms only from and after such date as the Borrower and the Bank shall have
amended this Agreement to the extent necessary to reflect any such changes in
the financial covenants and other terms and conditions of this Agreement.
1.04 All other terms contained in this Agreement shall, when the context
so indicates, have the meanings provided for by the UCC to the extent the same
are used or defined therein.
ARTICLE II. THE LOANS.
2.01(A) Subject to the terms and conditions of this Agreement, the Bank
will make a revolving credit facility (the "Revolving Credit Loan Commitment")
in an aggregate amount not to exceed $40,000,000 available to the Borrower,
pursuant to which the Bank may from time to time: (i) make revolving credit
advances, (ii) issue Letters of Credit to the Borrower or, (iii) make revolving
credit advances (a "DMC Revolving Credit Loan") to the Subsidiary Borrowers
(each a "Revolving Credit Loan"). The amount otherwise available for borrowing
under the Revolving Credit Loan Commitment shall be reduced by: (i) the
aggregate face amounts of all Letters of Credit issued by Bank for the account
of Borrower and outstanding or drawn but unreimbursed from time to time, which
shall in no event exceed $20,000,000 at any time, (ii) the amount of DMC
Revolving Credit Loans outstanding which in no event shall exceed $5,000,000 at
any time, (iii) the amount of Debt of FarmPro, Inc. guaranteed by Borrower and
(iv) the amount of
12
<PAGE>
Revolving Credit Loans outstanding. All borrowings outstanding on the date
hereof, under the revolving credit facility made available pursuant to the
Original Loan Agreement, shall remain outstanding as Revolving Credit Loans
hereunder. The Revolving Credit Loan Commitment shall terminate on October 31,
2000 (the "Revolving Credit Loan Termination Date").
(B) The Borrower may, from time to time, request whether for its own
account or for the Subsidiary Borrowers, by giving notice to the Bank prior to
11:00 a.m., that Revolving Credit Loans be made in an aggregate amount
specified, in a form specified (cash disbursement or continuation of outstanding
Loan) and on the Business Day specified in such request (which as to Euro-Dollar
Loans must also be a Euro-Dollar Business Day). Prime Rate Loans may be
disbursed on the date requested. If the Borrower elects whether for its own
account or for the Subsidiary Borrowers to pay interest on any Revolving Credit
Loan based on a Euro-Dollar Rate, notice must be given to the Bank at least
three Euro-Dollar Business days prior to the requested disbursement date. Any
such notice must also specify the Interest Period selected by the Borrower for
each Loan based on a Euro-Dollar Rate and each request for a Euro-Dollar Loan
and Interest Period with respect thereto shall be irrevocable once given. Not
later than 1:00 p.m., Chicago time, on the date specified in such request, the
Bank shall make the Revolving Credit Loan(s) to the Borrower or to the
Subsidiary Borrowers in the aggregate amount specified in such request, or
convert or continue the outstanding Loan, as the case may be.
(C) The proceeds of Revolving Credit Loans shall be disbursed by deposit to
the Borrower's account maintained at the Bank or otherwise in accordance with
the written instructions of the Borrower or the other provisions of this
Agreement. Revolving Credit Loans shall be used by the Borrower solely for its
working capital purposes, Letters of Credit for the Borrower or for the
Subsidiary Borrowers working capital purposes. Bank may from time to time issue
one or more Letters of Credit at the request and for the account of the
Borrower, provided: (i) the aggregate amount of Letters of Credit outstanding
including those being requested plus amounts drawn under Letters of Credit but
not repaid to the Bank plus the principal sum of advances of Revolving Credit
Loans outstanding does not exceed $40,000,000; (ii) Borrower pays to Bank its
then internally published Letter of Credit issuance fee; (iii) the Borrower
executes and delivers to the Bank the Bank's then current form of Letter of
Credit Application or Agreement, in form and content satisfactory to the Bank,
including without limitation a LaSalle L/C Connection Agreement; (iv) the Bank
is not restricted or prohibited from issuing such Letter of Credit by any Law,
regulation or policy of any Governmental Authority or by Bank policy, and (v)
the aggregate amount of Letters of Credit outstanding including those being
requested plus amounts drawn under Letter of Credit but not repaid to the Bank
does not exceed $20,000,000. Borrower's Obligations under this Agreement shall
include reimbursement obligations regarding Letters of Credit ("Letter of Credit
Obligations") and shall be secured by the Collateral in accordance with Article
IV below and any other collateral pledged to secure such Obligations pursuant to
any of the Documents.
Borrower agrees to reimburse Bank on demand for each payment made by Bank
under or pursuant to any Letter of Credit or any draft drawn on Bank pursuant to
a Letter of Credit. Bank
13
<PAGE>
may, in its sole discretion, provide for such reimbursement by advancing the
amount thereof to Borrower as a Revolving Credit Loan. In the event Bank does
not, in accordance with the terms and conditions hereof, make a Revolving Credit
Loan, for reimbursement, Borrower agrees to reimburse Bank in the amount of such
payment and shall also pay to Bank, on demand, interest at the rate provided in
Section 2.02(B) hereof on any amount paid by Bank under or pursuant to any
Letter of Credit or any draft drawn on Bank pursuant to a Letter of Credit from
the date of payment until the date of reimbursement to the Bank.
Notwithstanding anything to the contrary herein or in any Letter of Credit
application of Borrower or other Document, upon the occurrence of an Event of
Default, an amount equal to the aggregate amount of the outstanding Letters of
Credit and all drawn but unreimbursed Letters of Credit shall, at Bank's option
and without demand upon or further notice to Borrower, be deemed (as between
Bank and Borrower) to have been paid or disbursed by Bank under the Letters of
Credit (notwithstanding that such amounts may not in fact have been so paid or
disbursed), and a Revolving Credit Loan to Borrower in the amount of such Letter
of Credit Obligations to have been made and accepted, which Revolving Credit
Loan shall be immediately due and payable. In lieu of the foregoing, at the
election of Bank at any time after an Event of Default, Borrow shall, upon
Bank's demand, deliver to Bank cash, or other collateral of a type satisfactory
to Bank, having a value, as determined by Bank in its reasonable judgment, equal
to the aggregate Letter of Credit Obligations. Any such collateral and/or any
amounts received by Bank in payment of the Revolving Credit Loan made pursuant
to this subparagraph shall be held by Bank in a separate account appropriately
designated as a cash collateral account in relation to this Agreement and the
Letters of Credit and retained by Bank as collateral security for Borrower's
Obligations in respect of this Agreement and each of the Letters of Credit.
Such amounts shall not be used by Bank to pay any amounts drawn or paid under or
pursuant to any Letter of Credit, but may be applied to reimburse Bank for
drawings or payments under or pursuant to any Letter of Credit which Bank has
paid, or if no such reimbursement is required, any cash collateral account
established pursuant to this subparagraph following payment in full of all of
the Obligations, which are not (as determined by Bank) to be applied to
reimburse Bank for amounts actually paid by Bank in respect of Letter of Credit,
shall be returned to Borrower (after deduction of Bank's reasonable expenses).
This Agreement and any Letter of Credit application or other Document
regarding Letters of Credit shall be interpreted as supplemental to each other.
However, in the event of an express conflict in terms, the terms of this
Agreement shall govern.
No Letter of Credit shall (i) be issued after the Revolving Credit Loan
Termination Date and (ii) have an expiration date later than the Revolving
Credit Loan Termination Date.
Notwithstanding the above, the parties acknowledge that (i) Bank will, upon
the Borrower's request, issue for the account of Borrower Letters of Credit
having terms which expire after the expiration of the Revolving Credit Loan
Termination Date ("Post-Term L/Cs"), (ii) all security interests granted by
Borrower to Bank under this Agreement secure (inter alia) Letter of Credit
Obligations in respect of all Post-Term L/Cs, Bank agrees that upon payment and
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satisfaction in full of all Obligations of Borrower in respect of the Revolving
Credit Loans, at a time when (1) no Event of Default and no event which, with
the giving of notice, the lapse of time, or both, would constitute an Event of
Default, exists, (2) all funding obligations of Bank to Borrower have been
terminated, and (3) Borrower has no Obligations to Bank other than those in
respect of Post-Term L/Cs, Bank will upon request of Borrower release the
security interests granted by Borrower in this Agreement, provided that Bank
receives replacement cash collateral in an amount, covering such Letter of
Credit Obligations, and pursuant to such documents, as Bank shall deem necessary
in its sole discretion, (iii) no Post-Term L/Cs shall have a term which expires
more than three years after the expiration of the Revolving Credit Loan
Termination Date, and (iv) the aggregate face amounts of the Post-Term L/Cs
shall not exceed $6,000,000.00.
(D) All outstanding Revolving Credit Loans together with any accrued but
unpaid interest thereon shall be repaid in full on the Revolving Credit Loan
Termination Date. In addition, outstanding Revolving Credit Loans shall be
repaid immediately, without the necessity of any demand or notice from Bank, if
and to the extent that they exceed the limitations imposed by Section 2.02(A)
above. Borrower may repay and reborrow under the Revolving Credit Loan
Commitment subject to the terms and conditions of this Agreement.
(E) The Revolving Credit Loans shall be evidenced by a note in the form of
Exhibit A hereto (the "Revolving Credit Note") and DMC Revolving Credit Loans
shall be evidenced by a note in the form of Exhibit B hereto (the "DMC Revolving
Credit Note").
2.02(A) Except as provided in Section 2.02(B) below, while any Revolving
Credit Loan is a Euro-Dollar Loan, it shall bear interest at a per-annum rate
equal to the applicable Euro-Dollar Rate, and at other times it shall bear
interest at the applicable Floating Rate. Interest shall be calculated on the
basis of a 360-day year, counting the actual number of days elapsed. Interest
on the Prime Rate Loans shall be paid monthly in arrears commencing on November
1, 1997 and continuing on the first day of each month thereafter. Interest on
each Euro-Dollar Loan shall be paid on the applicable Payment Date; provided,
however, that if an Interest Period has a term of greater than 90 days, accrued
interest shall be payable on each 90-day anniversary of the first day of such
Interest Period, as well as on the Payment Date.
(B) Any Obligation of the Borrower or the Subsidiary Borrowers which is not
paid when due, whether at stated maturity, by acceleration or otherwise, shall
bear interest payable on demand at the interest rate then in effect with respect
thereto plus two percent. In addition, after the occurrence of any Event of
Default and delivery to the Borrower of the Bank's notice to charge post-default
interest, all Obligations of the Borrower and the Subsidiary Borrowers shall
bear interest at the highest rate provided for in the immediately preceding
sentence.
(C) In the event the Borrower or the Subsidiary Borrowers elect to pay
interest on any Revolving Credit Loan based on a Euro-Dollar Rate, upon the
expiry of the applicable Interest Period, such Revolving Credit Loan shall bear
interest at the applicable rate determined by reference to the Prime Rate unless
the Borrower or the Subsidiary Borrowers repays such
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Revolving Credit Loan on the Payment Date or the Borrower or the
Subsidiary Borrower timely elects, in the manner provided herein, to pay
interest based on a Euro-Dollar Rate prior to such expiry.
(D) Notwithstanding any other provisions of this Agreement, if at any time
the Bank shall determine in good faith that any change in applicable law or
regulation or in the interpretation thereof makes it unlawful or unduly
burdensome for the Bank to make or continue to maintain any Euro-Dollar Loan,
then the Bank shall promptly give notice thereof to the Borrower, and the Bank's
obligation to make, continue or effect by conversion such Euro-Dollar Loan under
this Agreement shall terminate until it is no longer unlawful or unduly
burdensome for the Bank to make such Euro-Dollar Loan. In such event, the
Borrower and the Subsidiary Borrowers shall prepay on demand the outstanding
principal amount of the affected Euro-Dollar Loans, together with all interest
accrued thereon and all other amounts payable to the Bank under this Agreement;
provided, however, the Borrower and the Subsidiary Borrowers may then elect to
borrow the principal amount of such Euro-Dollar Loans by means of a Prime Rate
Loan subject to the terms and conditions of this Agreement.
(E) Notwithstanding any other provision of this Agreement to the contrary,
if prior to the commencement of any Interest Period the Bank shall determine (i)
that deposits in the amount of any Euro-Dollar Loan scheduled to be outstanding
are not available to the Bank in the relevant market or (ii) by reason of
circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Adjusted LIBOR Rate, then the Bank shall promptly
give notice thereof to the Borrower and the obligation of the Bank to make or
effect by conversion any such Euro-Dollar Loan in such amount and for such
Interest Period shall terminate until deposits in such amount and for the
Interest Period selected by the Borrower shall again be readily available in the
relevant market and adequate and reasonable means exist for ascertaining the
Adjusted LIBOR Rate. Upon the giving of such notice, the Borrower and the
Subsidiary Borrowers may elect to either (i) pay or prepay, as the case may be,
such affected Loan together with all accrued interest thereon and all other
amounts payable to the Bank under Paragraph 2.02(H) of this Agreement or (ii)
convert such affected Revolving Credit Loan to a Prime Rate Loan, subject to all
the terms and conditions of this Agreement.
(F) With respect to the Euro-Dollar Loans, if the Bank shall determine in
good faith that any change in any applicable law, treaty, regulation or
guideline (including, without limitation, Regulation D of the Board of Governors
of the Federal Reserve System) or any new law, treaty, regulation or guideline,
or any interpretation of any of the foregoing by any governmental authority
charged with the administration thereof or any central bank or other fiscal,
monetary or other authority having jurisdiction over the Bank or its Euro-Dollar
Lending Office or the Euro-Dollar Loans contemplated by this Agreement (whether
or not having the force of law) shall:
(i) impose, modify or deem applicable any reserve (but excluding with
respect to any Euro-Dollar Loan any reserve percentage included in
determining the applicable
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Adjusted LIBOR Rate), capital, special deposit, compulsory loan,
assessment or similar requirements against assets held by, or deposits
in or for the account of, or loans by, or any other acquisition of
funds or disbursements by, the Bank or an office thereof;
(ii) subject the Bank, any Euro-Dollar Loan or the Note evidencing such
Euro-Dollar Loans to any tax (including, without limitation, any
United States interest equalization tax or similar tax however named
applicable to the acquisition or holding of debt obligations and any
interest or penalties with respect thereto), duty, charge, stamp tax,
fee, deduction or withholding in respect of this Agreement, any Euro-
Dollar Loan or any Note evidencing a Euro-Dollar Loan, except such
taxes as may be measured by the overall net income of the Bank or its
Euro-Dollar Lending Office and imposed by the jurisdiction, or any
political subdivision or taxing authority thereof, in which the Bank's
principal executive office or its Euro-Dollar Lending Office is
located;
(iii) change the basis of taxation of payments of principal and interest
due from the Borrower to the Bank hereunder or under any Note
evidencing a Euro-Dollar Loan (other than by a change in taxation of
the overall net income of the Bank); or
(iv) impose on the Bank any penalty with respect to the foregoing or any
other condition regarding this Agreement, its disbursement, any Euro-
Dollar Loan or any Note evidencing a Euro-Dollar Loan except for any
penalty which results directly from the negligence or misconduct of
the Bank in requesting such reimbursement;
and the Bank shall determine that the result of any of the foregoing is to
increase the cost (whether by incurring a cost or adding to a cost) to the Bank
of making or maintaining any Euro-Dollar Loan hereunder or to reduce the amount
of principal or interest received by the Bank (without benefit of, or credit
for, any prorations, exemptions, credits or other offsets available under any
such laws, treaties, regulations, guidelines or interpretations thereof), then
the Borrower and the Subsidiary Borrowers shall pay to the Bank on demand, from
time to time as specified by the Bank, such additional amounts as the Bank shall
determine are sufficient to compensate and indemnify the Bank for such increased
cost or reduced amount; provided that the Bank shall give prior notice of such
increased cost or reduced amount and the Borrower and the Subsidiary Borrowers
may at their option, prepay such affected Euro-Dollar Loans together with the
amount payable pursuant to Paragraph 2.03(H) hereof. If Bank makes such a claim
for compensation, it shall provide to the Borrower a certificate setting forth
such increased cost or reduced amount and the basis for such determination as a
result of any event mentioned herein and such certificate shall in the absence
of manifest error, constitute prima facie evidence as to the amount thereof.
(G) If prior to any Interest Period the Bank shall have determined (which
determination shall be conclusive and binding upon the Borrower and the
Subsidiary Borrowers) that the method of computing the rate of interest
applicable to any Euro-Dollar Loan does not accurately reflect
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<PAGE>
the cost to the Bank of making or effecting by conversion any such Euro-Dollar
Loan, then the Bank shall give prompt telephonic, telex or telegraphic notice of
such determination to the Borrower. After such notice and in the event the
Borrower or the Subsidiary Borrowers desire to make or effect by conversion such
Euro-Dollar Loan, during the 30 calendar days next succeeding the giving of such
notice, the Borrower and the Bank shall negotiate in good faith in order to
arrive at a mutually satisfactory method of computing the interest rate
applicable to the Euro-Dollar Loans hereunder, as the case may be, to be
substituted for the interest rate specified in this Agreement. If within such 30
day period the Borrower and the Bank shall agree in writing upon a substituted
interest rate, then such substituted interest rate shall be effective from the
first day of the relevant Interest Period for such Euro-Dollar Loan. If the
Borrower and the Bank are unable to agree in writing upon a substituted rate
within the above thirty (30) day period, then the Borrower and the Subsidiary
Borrowers shall on demand either (i) prepay, without penalty or charge, the
relevant Euro-Dollar Loans, in full, or (ii) convert such Euro-Dollar Loans into
Prime Rate Loans subject to all the terms and conditions of this Agreement, and,
in either case, shall pay interest thereon from the date such Euro-Dollar Loan
was made or effected by conversion until such Euro-Dollar Loan is prepaid or
converted, as the case may be, at the rate per annum (rounded upward, if
necessary, to the nearest whole multiple of 1/16 of 1%) which is equal to the
sum of (i) 3.5% and (ii) the effective cost as computed by the Bank of
maintaining such Revolving Credit Loan from deposits obtained in the secondary
market, together with all other amounts then due and payable to the Bank under
this Agreement. A certificate as to such effective cost and the manner of the
computation of such cost shall, in the absence of manifest error, constitute
prima facie evidence as to the amount thereof.
(H) In the event the Bank shall incur any loss, cost or expense
(including, without limitation, any loss of profit and any loss, cost or expense
incurred by reason of the liquidation or re-employment of deposits or other
funds acquired by the Bank to fund or maintain any Euro-Dollar Loan or the
relending or reinvesting of such deposits or amounts paid or prepaid to the
Bank) as a result of:
(i) any payment (including, without limitation, any prepayment) of a
Euro-Dollar Loan on a date other than the last day of the then
applicable Interest Period;
(ii) any failure by the Borrower or the Subsidiary Borrowers to borrow a
Euro-Dollar Loan on the date specified in its notice given pursuant
to this Agreement;
(iii) any failure by the Borrower or the Subsidiary Borrowers to make any
payment of principal or interest when due on any Euro-Dollar Loan,
whether at stated maturity, by acceleration or otherwise; or
(iv) the occurrence of any Event of Default;
then, upon the demand of the Bank, the Borrower and the Subsidiary Borrowers
shall pay to the Bank such amount as will reimburse the Bank for such loss, cost
or expense to the extent such
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loss, cost or expense is not otherwise reimbursed by the after-maturity interest
rate specified in this Agreement or reimbursed pursuant to Section 9.03 hereof.
If Bank makes such a claim for compensation, it shall provide to the Borrower a
certificate setting forth the amount of such loss, cost or expense in reasonable
detail and the manner of computation of the same and such certificate shall
constitute, in the absence of manifest error, prima facie evidence as to the
amount thereof.
(I) The Bank may, at its option, elect to make, fund or maintain its Loans
hereunder at the branch or office specified on the signature page hereto or such
other of its branches or offices as the Bank may from time to time elect.
(J) Notwithstanding any provision of this Agreement to the contrary, the
Bank shall be entitled to fund and maintain its funding of all or any part of
the Loans in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder as to Euro-Dollar Loans
shall be made as if the Bank had actually funded and maintained each Euro-Dollar
Loan during each Interest Period for such Euro-Dollar Loan through the purchase
of deposits in the relevant market having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the Euro-Dollar Rate for
such Interest Period.
(K) The provisions of Section 2.02(H) hereof shall survive for a period of
six months following the later of the termination of this Agreement and the
payment in full of the Revolving Credit Loans.
(L) The Bank agrees that in making calculations and determinations under
Sections 2.02(F), (G) and (H) above, it will do so in good faith and will make
allocations, on an equitable basis, of amounts to be charged to Borrower and to
other customers of the Bank which have arrangements for LIBOR borrowings similar
to those hereunder.
2.04 If, at any time, the interest rate and other charges imposed
hereunder shall be deemed by any competent Governmental Authority to exceed the
maximum rate of interest permitted by any applicable Laws, for such time as the
interest and such charges would be deemed excessive, its application shall be
suspended and there shall be charged instead the maximum rate of interest and
charges permissible under such Laws.
2.05 All payments, which are not prepayments, received from the Borrower
or the Subsidiary Borrowers for payment on the Revolving Credit Loans shall be
applied by the Bank first to unpaid interest due and payable on the Revolving
Credit Loan, then to the reduction of the principal outstanding on the Revolving
Credit Loans.
2.06 (A) At Closing, the Borrower shall pay to Bank a non-refundable
closing fee in the amount of $100,000.00, which fee shall be fully earned at the
time of Closing.
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(B) The Borrower shall pay to Bank a fee (the "Facility Fee") equal to
the Applicable Margin per annum times $40,000,000.00. Such fee shall be payable
quarterly in arrears on the first day of each September, December, March and
June hereafter.
2.07 All payments received from the Borrower hereunder shall be paid
directly to the Bank without setoff or counterclaim in immediately available
funds. The Bank shall send the Borrower statements of all amounts due hereunder,
which statements shall be considered correct and conclusively binding on the
Borrower absent manifest error.
ARTICLE III. CONDITIONS PRECEDENT
--------------------
The obligation of the Bank to make the Loans is subject to the following
conditions precedent:
3.01 The Borrower shall have delivered or caused to be delivered to the
Bank on or before the date of, but prior to, any disbursement of Revolving
Credit Loans (hereinafter called the "Closing"), the following, each to be
satisfactory to the Bank in all respects:
(A) The Revolving Credit Note, duly executed by the Borrower and the DMC
Revolving Credit Note duly executed by DMC and DSC.
(B) Evidence of issuance of the Subordinated Notes, receipt of the
proceeds thereof and repayment of the Term Loan under the Original Loan
Agreement.
(C) Such other documents, certificates and evidence as the Bank may
request to consummate the transactions contemplated hereby.
3.02 At the time of the Closing, at the time of each subsequent
disbursement under the Revolving Credit Loan Commitment, each of the following
statements shall be true; and (i) at the Closing, the Borrower shall deliver to
the Bank a certificate dated the date of the Closing, signed by an Authorized
Borrower Representative, to such effect, and (ii) with respect to each
subsequent Revolving Credit Loan, Borrower's or Subsidiary Borrower's request
for same shall be deemed to be Borrower's representation to such effect at and
as of the time such Revolving Credit Loan is made.
(A) The representations and warranties set forth in this Agreement are
true and correct as of such date.
(B) No Event of Default shall have occurred and be continuing, and no
event shall have occurred and be continuing that, with the giving of notice or
passage of time or both, would be an Event of Default.
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(C) No material adverse change shall have occurred in the financial
condition of the Borrower since the date of this Agreement.
(D) All liens on Collateral granted to Bank are and remain valid first
priority liens (subject only to Permitted Liens) in full force and effect.
ARTICLE IV. COLLATERAL SECURITY
-------------------
4.01 The property in which a security interest is granted pursuant to the
provisions of Sections 4.02 and 4.03 is herein collectively called the
"Collateral." The Collateral, together with all of the Borrower's other
property of any kind held by the Bank, shall stand as one general, continuing
collateral security for all Obligations of the Borrower and may be retained by
the Bank until all such Obligations have been satisfied in full, and this
Agreement shall have been terminated.
4.02 As security for the prompt satisfaction of all Obligations of the
Borrower, the Borrower hereby assigns, transfers and sets over to the Bank all
of its right, title and interest in and to, and grants the Bank a lien on and a
security interest in, all amounts that may be owing from time to time by the
Bank to the Borrower in any capacity, including, but without limitation, any
balance or share belonging to the Borrower of any deposit or other account with
the Bank, which lien and security interest shall be independent of any right of
set-off which the Bank may have.
4.03 As further security for the prompt satisfaction of all Obligations of
the Borrower, the Borrower hereby assigns, transfers and sets over to the Bank
all of its right, title and interest in and to, and grants to the Bank a lien on
and security interest in, all of its right, title and interest in and to the
following, wherever located, whether now owned or hereafter acquired or arising,
together with all replacements therefor, proceeds, including insurance proceeds,
thereof and products thereof:
(A) Accounts;
(B) Inventory;
(C) Equipment;
(D) rights as seller of goods and rights to returned, rejected or
repossessed goods;
(E) General Intangibles, including without limitation those described on
Schedule 4 hereto; and
(F) all books and records pertaining to any of the foregoing.
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In addition and as further security, the Borrower will execute and deliver to
the Bank security agreements and such other documents, including financing
statements, in connection herewith as shall be required by the Bank.
4.04 The liens created in Sections 4.02 and 4.03 shall be first and prior
liens, subject only to Permitted Liens.
4.05 The Borrower represents and warrants to the Bank as follows:
(A) The Borrower is the owner of the Collateral and grants the security
interest made in Sections 4.02 and 4.03 in consideration of value given by the
Bank, the sufficiency of which the Borrower hereby acknowledges.
(B) Other than the security interests granted in Sections 4.02 and 4.03,
the Collateral is free from any lien, security interest, encumbrance or other
right, title or interest of any other Person except for Permitted Liens.
(C) All Collateral is kept solely at the location or locations identified
in Schedule 2. Except as specified on Schedule 2, no Collateral is or shall be
kept, stored or maintained with a bailee, warehouseman, carrier or similar party
without the Bank's prior written consent.
(D) With respect to Accounts, except as otherwise disclosed by the Borrower
to the Bank in writing:
(i) the Accounts are genuine, in all respects what they purport to
be and are not evidenced by a judgment;
(ii) the Accounts represent bona fide transactions completed in
accordance with the terms and provisions contained in the
invoices and other documents evidencing same;
(iii) the amounts thereof, which are shown on all such invoices and
statements evidencing same, are actually and absolutely owing
to the Borrower and are not contingent for any reason;
(iv) to the best of the Borrower's knowledge, there are no setoffs,
counterclaims or disputes existing or asserted with respect to
the Accounts and the Borrower has not made any agreement with
any Account Debtor thereof for any deduction therefrom;
(v) to the best of the Borrower's knowledge, there are no facts,
events or occurrences which in any way impair the validity or
enforceability of the
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Accounts or tend to reduce the amount payable thereunder from
the amount thereof;
(vi) to the best of the Borrower's knowledge, all of the Account
Debtors have the capacity to contract and are solvent;
(vii) the services and/or goods sold giving rise to the Accounts are
not subject to any lien, claim, encumbrance or security
interest except that of the Bank and except for Permitted
Liens;
(viii) the Borrower has no knowledge of any fact or circumstance
which would impair the validity or collectability of the
Accounts;
(ix) to the best of the Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against
any Account Debtor which might result in a material adverse
change in such Account Debtor's financial condition; and
(x) none of the Accounts is pursuant to an invoice requiring
payment in more than 30 days, except for Accounts representing
in the aggregate not more than 5% of all Accounts.
(E) With respect to Inventory, the Borrower has correct and accurate
records itemizing and describing the type and quantity of Inventory, and the
Borrower's cost therefor and selling price thereof; provided, however, that it
is acknowledged that Borrower does not maintain a perpetual inventory at its
manufacturing facility, but rather performs an annual physical inventory
thereat.
4.06 Immediately upon the Borrower's receipt of that portion of the
Collateral, if any, which is evidenced by an instrument and/or document,
including promissory notes, documents of title, certificated securities and
warehouse receipts (collectively the "Special Collateral") for the purpose of
perfecting the Bank's security interest in such Special Collateral, the Borrower
shall deliver the original thereof to the Bank, together with appropriate
endorsements and/or specific evidence of the assignment thereof to the Bank, in
form and substance acceptable to the Bank; provided, however, that unless there
shall exist an Event of Default or Bank shall have specifically requested same,
Borrower need not deliver to Bank Special Collateral representing advances to
employees.
4.07 If and to the extent that any of the Collateral is evidenced by, or
arises under, any contract with the United States of America or any agency or
instrumentality thereof, the Borrower will immediately notify the Bank of same.
4.08 The Borrower covenants and agrees with the Bank as follows:
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(A) The Borrower will not hereafter grant a security interest in the
Collateral, or transfer the Collateral to any other Person, except as
specifically permitted by this Agreement.
(B) The Borrower will at all times defend the Collateral against any and
all claims of any Person adverse to the claims of the Bank.
(C) All of the Borrower's places of business, including the Borrower's
principal office, are described on Schedule 2. All Collateral covered by this
Agreement is and will be kept only at location(s) specified on Schedule 2.
Collateral shall not be removed to, or kept at, and Borrower shall not establish
a place of business at, any other place without the prior written consent of the
Bank, other than new locations within the 48 contiguous states, provided that
(i) at least 60 days prior to the establishment of such new location, the
Borrower shall have given Bank written notice thereof, and (ii) prior to the
establishment of such new location, the Borrower shall have delivered to Bank
such financing statements, third-party lien waivers and other documentation as
Bank shall require in connection therewith. If Collateral is at any time kept
or located at locations other than those listed, the Bank's security interest
therein shall continue.
(D) During the preceding five years, neither the Borrower nor any
predecessor of the Borrower has been known as or used any corporate, fictitious
or trade names or trade styles, other than those disclosed on Schedule 3.
(E) All patents, trademarks, service marks and copyrights, and all
licenses, registrations and applications for registration thereof, owned, used
or to be used by the Borrower in the operation of its business, are listed on
Schedule 4. The Borrower will promptly notify the Bank in writing of the
Borrower's acquisition of any such assets hereafter occurring.
(F) The Equipment in which Bank is granted a security interest will not at
any time be affixed or attached to any real estate in such a manner that it will
become a fixture, unless the Bank shall have a first priority, perfected lien on
such real estate as security for the Obligations of the Borrower. The Equipment
will be used or bought for use solely for business purposes.
(G) The Borrower shall permit the Bank to inspect and evaluate the
Collateral and any books and records of the Borrower relating thereto at all
reasonable times and to verify any Accounts by any reasonable method
satisfactory to the Bank, all at the expense and risk of the Borrower.
(H) By identifying Accounts on any schedule or other document delivered to
Bank the Borrower shall be deemed to be making the representations and
warranties contained in Section 4.05(D) with respect to such Accounts.
(I) With respect to Accounts, the Borrower shall:
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<PAGE>
(i) promptly upon the Borrower's learning thereof, inform the Bank in
writing of any material delay in the Borrower's performance of
any of its obligations to any Account Debtor whose outstanding
Accounts aggregate $500,000.00 or more and of any assertion of
any claims, offsets or counterclaims by any such Account Debtor
and of any extraordinary allowances, credits and/or other monies
granted by the Borrower to any such Account Debtor;
(ii) not permit or agree to any material extension, compromise or
settlement or make any change or modification of any kind or
nature with respect to any material Accounts, including any of
the terms relating thereto; provided, however, Borrower may
convert the Accounts of an Account Debtor identified to it in a
side letter of even date herewith (the "Side Letter") to a note
in an aggregate principal amount not to exceed $6,000,000.00 in
accordance with terms described in the Side Letter;
(iii) promptly upon the Borrower's receipt or learning thereof,
inform the Bank of the commencement of bankruptcy proceedings
involving any Account Debtor whose outstanding Accounts aggregate
$500,000.00 or more; and
(iv) other than goods returned in the ordinary course of business and
having an aggregate invoice price not exceeding $500,000.00 per
year, keep all goods returned by any Account Debtor and all goods
repossessed or stopped in transit by the Borrower from any
Account Debtor segregated from the other property of the
Borrower, and hold the same as trustee for the Bank until resold
or otherwise directed in writing by the Bank.
(J) With respect to Inventory, the Borrower shall from and after the date
hereof keep correct and accurate records reflecting the Borrower's cost therefor
and the selling price thereof, all of which records shall be available at all
reasonable times, upon demand, to any of the Bank's officers, employees or agent
for inspection and copying thereof.
(K) The Borrower shall keep and maintain the Equipment in good operating
condition and repair and shall make all necessary replacements thereof and
renewals thereto so that the value and operating efficiency thereof shall at all
times be maintained and preserved; provided, however, that the Borrower may sell
obsolete Equipment for a price which reasonably approximates its fair market
value if the proceeds thereof are paid directly to the Bank for application to
the Borrower's Obligations.
4.09 The Borrower shall, at its sole cost and expense, keep and maintain
the Collateral insured for the greater of the full insurable value or the full
replacement value thereof against loss or damage by fire, theft, explosions,
sprinklers and all other hazards and risks (i) covered by extended coverage
and/or (ii) ordinarily insured against by other owners or users of properties in
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similar businesses. All such policies of insurance shall be in form, with
insurers and in such amounts as may be satisfactory to the Bank. The Borrower
shall deliver to the Bank a certificate of insurance with respect to each policy
of insurance and evidence of payment of all premiums for each such policy. Such
policies of insurance shall contain a lender's loss payable endorsement, in form
and substance acceptable to the Bank, showing loss payable to the Bank. Such
endorsement or an independent instrument furnished to the Bank shall provide
that all insurance companies shall give the Bank at least thirty (30) days prior
written notice before any such policy or policies of insurance shall be altered
or cancelled and that no act or default of the Borrower or any other Person
shall affect the right of the Bank to recover under such policy or policies of
insurance in case of loss or damage. The Borrower hereby directs all insurers
under such policies of insurance to pay all proceeds payable thereunder directly
to the Bank. With respect to all claims in excess of $100,000.00, and with
respect to all claims of any size at any time during the existence of an Event
of Default, the Borrower irrevocably appoints the Bank and all officers,
employees or agents designated by the Bank as the Borrower's true and lawful
attorney and agent in fact for the purpose of making, settling and adjusting
claims under such policies of insurance, endorsing the name of the Borrower on
any check, draft, instrument or other item of payment for the proceeds of such
policies of insurance and for making all determinations and decisions with
respect to such policies of insurance. If Borrower at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above, or to pay any premium in whole or in part relating thereto, the
Bank, without waiving or releasing any of the Obligations of the Borrower or any
Event of Default, may at any time or times thereafter, but shall be under no
obligation to do so, obtain and maintain such policies of insurance and pay such
premiums and take any other action with respect thereto which the Bank deems
necessary or advisable. All sums so disbursed by the Bank, including attorney's
fees, court costs, expenses and other charges relating thereto, shall be part of
the Obligations, payable by the Borrower to the Bank on demand.
4.10 The Bank may, at any time or times hereafter, in its sole discretion,
without waiving or releasing any obligation, liability or duty of the Borrower
under this Agreement or the other Documents, or any Event of Default, pay,
acquire and/or accept an assignment of any security interest, lien, claim or
encumbrance asserted by any Person against the Collateral. All sums paid by the
Bank in respect thereof and all costs, fees and expenses, including, without
limitation, attorneys' fees, court costs, expenses and other charges relating
thereto, which are incurred by the Bank on account thereof, shall be payable,
upon demand, by the Borrower to the Bank and shall be additional Obligations of
the Borrower hereunder secured by the Collateral.
4.11 Simultaneous herewith, the Subsidiary Borrowers are delivering the
following: (a) the DMC Revolving Credit Note, (b) a guaranty of the Obligations
of Borrower, and (c) security agreements pledging certain assets.
4.12 Each of the representations, warranties and agreements set forth in
this Article IV shall survive the execution and delivery of this Agreement and
shall remain effective until this Agreement shall have been terminated and all
Obligations of the Borrower shall have been paid and satisfied in full.
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ARTICLE V. REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Bank to consummate the transactions contemplated hereby, the
Borrower represents and warrants to the Bank as follows:
5.01 The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has the lawful power and
authority to own its properties and to carry on its business as now conducted,
and is qualified to do business and is in good standing as a foreign corporation
in the State of Illinois and in each other jurisdiction wherein the nature of
the business transacted or to be transacted by it or property owned or to be
owned by it makes such qualification necessary and where the failure to be so
qualified would have a material adverse effect on its business, properties or
condition, financial or otherwise and possesses all material permits necessary
to operate the business it conducts.
5.02 The Borrower is empowered to perform all acts and things undertaken
and done pursuant to this Agreement and has taken all corporate or other action
necessary to authorize the execution, delivery and performance of the Documents.
The officers of Borrower executing the Documents have been duly elected or
appointed and have been fully authorized to execute such Documents at the time
executed. The Documents, when executed and delivered, will be the legal, valid
and binding obligations of the Borrower, enforceable against it in accordance
with their respective terms.
5.03 The Financial Statements are complete and accurate, fairly present
the financial condition of the Borrower at the respective dates thereof and the
results of operations for the respective periods covered thereby, and (subject
to normal year-end adjustments with respect to interim Financial Statements)
were prepared in accordance with GAAP. The Borrower does not have any material
liabilities or obligations (contingent or otherwise), liability for taxes or
unusual forward or long-term commitments, except as disclosed in the Financial
Statements, and except for obligations under Stockholder Agreements.
5.04 Since the date of Borrower's most recent audited Financial
Statements, there has been no material change (except as described in the
Offering Memorandum) in the assets, liabilities or financial condition of
Borrower, other than changes arising from transactions in the ordinary course of
business and the financing transactions contemplated by this Agreement, and none
of such changes has been materially adverse.
5.05 Other than as set forth in the Financial Statements, there are no
actions, suits or proceedings pending, or, to the best of the knowledge of the
Borrower, threatened against or affecting the Borrower at law or in equity or
before or by any Governmental Authority or any foreign equivalent thereof, which
involve the possibility of any material judgment or liability, or which are, in
the aggregate, material in light of the financial condition and assets of the
Borrower. There are no actions, suits, investigations or proceedings pending,
or to the best of the knowledge
27
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of the Borrower, threatened against the Borrower or its properties regarding
Environmental Laws, the manufacture, storage or treatment of Hazardous
Substances or products liability.
5.06 The Borrower is not in violation of, and the execution and delivery
of the Documents and the performance by the Borrower of its obligations under
the Documents, do not and will not result in the Borrower being in violation of
or in conflict with, or constitute a default under any of, the Borrower's
organizational documents, any term or provision of any note, mortgage,
indenture, contract, agreement, instrument, judgment or Law applicable to the
Borrower, or result in the creation or imposition of any mortgage, lien, charge
or encumbrance of any nature whatsoever (other than those in favor of Bank) upon
any of the assets of the Borrower pursuant to any such term or provision. The
Borrower is not in default, after the expiration of any applicable grace or cure
periods, in any respect in the performance or fulfillment of any of its
obligations, covenants or conditions contained in any agreement or instrument to
which it is a party or by which any of its properties may be bound, and the
Borrower does not know of any dispute regarding any such agreement or
instrument.
5.07 The Borrower's uses of the proceeds of the Loans are, and will
continue to be, legal and proper corporate uses which are consistent with all
applicable Laws, with Borrower's Certificate of Incorporation, its By-Laws, the
resolutions of its Board of Directors, and the terms of this Agreement.
5.08 The Borrower does not have outstanding any Debt (except to Bank and
the Subordinated Notes,) or other obligation for borrowed money, or for the
deferred purchase price of property or services and the Borrower is not
obligated as guarantor, co-signer or otherwise on any Debt or other obligation
of any kind of any other Person, except and to the extent shown on the Financial
Statements at the date of this Agreement, incurred in the ordinary course of
business or pursuant to the Stockholder Agreements. No Person is in default
under any of said obligations.
5.09 All tax returns and reports of the Borrower required by law to be
filed, have been duly filed, and all taxes, assessments, fees and other
governmental charges (other than those presently payable without penalty or
interest) upon the Borrower or upon any of its properties or assets, which are
due and payable, have been paid. The charges, accruals and reserves on the
books of the Borrower in respect of taxes are considered adequate by the
Borrower, and the Borrower does not know of any assessment of a material nature
against it.
5.10 Except to the extent that failure to comply would not materially
interfere with the conduct of the business of the Borrower, or affect in any way
the Borrower's obligations (or Bank's rights) under the Documents, the Borrower
has complied with all applicable laws with respect to: (i) any restrictions,
specifications or other requirements pertaining to products that the Borrower
manufactures and sells or the services it performs, including without limitation
all Environmental Laws, (ii) the conduct of its business and (iii) the use,
maintenance, and operation of the real and personal properties owned or leased
by it in the conduct of its business.
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5.11 No authorization, consent, license or approval of, or filing or
registration with, or notification to, any Governmental Authority is required in
connection with the execution, delivery or performance of the Documents by the
Borrower.
5.12 The Borrower has good and marketable title to all of its assets, all
subject to no security interest, encumbrance, lien or claim of any Person
excepting only Permitted Liens, and there are no financing statements or other
evidence of any such security interest, encumbrance or lien or any claim of any
Person on file in any public office other than those evidencing Permitted Liens.
5.13 Except as set forth on Schedule 5 hereto, the Borrower does not own,
directly or indirectly, any Stock. As of the date of this Agreement, the
ownership of all of the issued and outstanding shares of Stock of the Borrower
is as set forth on Schedule 5 hereto. All outstanding shares of the Borrower
have been duly authorized, validly issued, fully paid and are nonassessable.
5.14 The Borrower is in full compliance with the requirements of ERISA; no
fact, including, but not limited to, any Reportable Event, exists in connection
with any Plan which might constitute grounds for the termination of any such
Plan by the PBGC or for the appointment by the appropriate United States
district court of a trustee to administer any such Plan; none of the Borrower,
its Subsidiaries and the ERISA Affiliates maintains any Plan which has an
"accumulated funding deficiency" (as defined in Section 412 of the Internal
Revenue Code) whether or not waived; none of the Borrower, its Subsidiaries and
the ERISA Affiliates has incurred or is expected to incur, directly or
indirectly, any actual or contingent liabilities arising from plan termination
or withdrawal, under Title IV of ERISA; none of the Borrower, its Subsidiaries
and the ERISA Affiliates has any Plan with an actuarial present value of accrued
plan benefits which exceeds the net assets available for such benefits
determined as of said Plan's most recent actuarial valuation within the last
twelve (12) months; except as disclosed in writing to the Bank prior to the date
hereof, none of the Borrower, its Subsidiaries and the ERISA Affiliates has any
employees who participate in a Multiemployer Plan, and no such Multiemployer
Plan is in reorganization under Section 4241 of ERISA or is "insolvent" (as
described in Section 4245 of ERISA); and none of the Borrower, its Subsidiaries
and the ERISA Affiliates nor any fiduciary designated by any of them has engaged
in a "prohibited transaction" within the meaning of Section 4975 of the Internal
Revenue Code or Section 406 of ERISA with respect to any "employee benefit
plan," as defined in Section 3(3) of ERISA.
5.15 The Borrower retains sufficient capital for the business and
transactions in which it engages or intends to engage, no obligation incurred
hereby is beyond the ability of the Borrower to pay as such obligation matures,
the Borrower is not contemplating either the filing of a petition under any
state or federal bankruptcy or insolvency laws or the liquidating of all or a
major portion of any of its property, and Borrower has no knowledge of any
person contemplating the filing of any such petition against it.
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5.16 No brokerage commissions, finder's fees or investment banking fees
will be payable to any Person engaged by or on behalf of Borrower or any of its
Affiliates in connection with the transactions contemplated by this Agreement
other than as contemplated by Offering Memorandum.
5.17 The Subordinated Notes have been validly issued in accordance with the
terms of the Indenture. The Borrower has received the proceeds of the
Subordinated Notes. No event of default or event which with the passage of
time, the giving of notice or otherwise could constitute an event of default
under the Subordinated Notes or the Indenture has occurred. The Obligations of
the Borrower constitute Senior Indebtedness and Designated Senior Indebtedness
under the Indenture. The Offering Memorandum is true, complete and correct in
all material respects.
5.18 The DMC Acquisition Agreement is in full force and effect as of the
date hereof, has not been terminated, rescinded or withdrawn, and no material
portion thereof has been amended or waived by any party. All representations
and warranties of Borrower contained in the DMC Acquisition Agreement and, to
the best of Borrower's knowledge following diligent inquiry, all representations
and warranties of the DMC Seller contained in the DMC Acquisition Agreement, are
true and correct as of the date hereof with the same effect as though made on
and as of the date hereof.
5.19 There exists no actual or threatened termination, cancellation or
limitation of, or any modification or change in, the proposed business
relationship of Borrower with any customer or group of customers whose purchases
individually or in the aggregate are material to the current business of
Borrower, or in the proposed business relationship of Borrower with any material
supplier, and Borrower reasonably anticipates that all such customers and
suppliers will continue a business relationship with Borrower on a basis no less
favorable to the Borrower than that heretofore conducted; and there exists no
other condition or state of facts or circumstances which would materially
adversely affect the current operation of the business of Borrower, DMC or DSC
after the consummation of the transactions contemplated by this Agreement and
the DMC Acquisition Agreement on a basis no less favorable to the Borrower than
that on which it has heretofore been conducted by Borrower.
5.20 No brokerage commissions, finder's fees or investment banking fees
will be payable to any Person engaged by or on behalf of Borrower or any of its
Affiliates in connection with the transactions contemplated by this Agreement or
the DMC Acquisition Agreement.
5.21 No consent, authorization or approval of, or declaration,
notification, filing or registration with, any governmental or regulatory
authority or any other Person (including, without limitation, the filing of any
"Premerger Notification Report" with the Federal Trade Commission and the
Antitrust Division of the Department of Justice pursuant to Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations issued pursuant thereto), is necessary in connection with the
consummation of the transactions contemplated by the DMC Acquisition Agreement,
which has not been obtained or made on or
30
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prior to the date hereof. No such consents, authorizations or approvals impose
any conditions to the consummation of the transactions contemplated by the DMC
Acquisition Agreement or to the conduct by Borrower of its business or otherwise
other than conditions which have been disclosed to Bank in writing and are not
adverse to Borrower or its current business in any material respect.
5.22 Simultaneously with the Closing, the Acquisition of DMC and DSC by the
Borrower shall have occurred pursuant to and in accordance with the terms of the
DMC Acquisition Agreement.
5.23 No representation or warranty by the Borrower contained herein or in
any certificate or other document furnished by or on behalf of the Borrower in
connection with the transactions hereunder contains any untrue statement of
material fact or omits to state a material fact necessary to make such
representation or warranty not misleading in light of the circumstances under
which it was made.
5.24 All of the representations and warranties set forth in this Article V
shall survive and continue to be true, complete and correct until all
Obligations of the Borrower hereunder are paid and satisfied in full and this
Agreement shall have been terminated.
ARTICLE VI. NEGATIVE COVENANTS
------------------
The Borrower covenants that until all Obligations of Borrower are paid and
satisfied in full, and the Bank's obligations hereunder have terminated, the
Borrower will not, nor will it permit any of its Subsidiaries to, directly or
indirectly, without the prior consent in writing of the Bank:
6.01 [Intentionally Omitted]
6.02 Make any loans, or advances, whether secured or unsecured, to, or
make any guaranty of, or otherwise become obligated on behalf of any other
Person for, any such loans or advances to, any Person, except for guaranties in
favor of the Bank, and advances for business expenses made to employees in the
ordinary course of business (not to exceed $5,000 per employee at any time
outstanding), and the conversion of an Account to Debt in accordance with the
Side Letter.
6.03 Dispose by sale, assignment, lease, sale and leaseback or otherwise
any of the Collateral, whether now owned or hereafter acquired and including,
without limitation, any notes, accounts receivable, equipment or machinery,
except that, unless an Event of Default shall exist and Bank shall have required
the cessation of inventory sales, such Person may sell its inventory in the
ordinary course of business as conducted by it on the date of this Agreement,
for a reasonably equivalent value.
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6.04 [Intentionally Omitted.]
6.05 Own, hold, purchase or acquire Stock, bonds, debentures or other
securities of, or make any capital contribution to, any Person or otherwise
engage in an Acquisition, or form any Subsidiary; provided, however, (i)
Borrower may make an Acquisition or Acquisitions in addition to the Acquisition
of DMC and DSC whose total aggregate gross purchase price do not exceed
$5,000,000, and (ii) Borrower may hold or form other Subsidiaries (domestic or
foreign) if (a) prior to forming a new Subsidiary after the date hereof,
Borrower gives 30 days prior written notice thereof to Bank and (b) the total
aggregate amount of assets of all such Subsidiaries other than DMC and DSC does
not exceed 10% of the total assets of Borrower.
6.06 Make any material change in its financial structure, make any
material change in its management (except on prior notice to the Bank), change
its name (except on 90 days' prior notice to the Bank), enter into any merger,
consolidation, dissolution, liquidation, reorganization or recapitalization, or
reclassification of its Stock, or issue any Stock or issue any warrant, right or
option pertaining thereto or other security convertible into any of the
foregoing.
6.07 Engage in business activities or operations substantially different
from and unrelated to its business activities on the date of this Agreement.
6.08 Declare or pay any dividends, or redeem or repurchase any of, or make
any other payment or distribution on account of, any Stock, except as permitted
under the terms of the Indenture.
6.09 Enter into any sale-leaseback transaction.
6.10 [Intentionally omitted]
6.11 Directly or indirectly apply any part of the proceeds of the Loans
for any purpose other than as set forth herein.
6.12 Directly or indirectly apply any part of the proceeds of the Loans to
the purchasing or carrying of any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, or any
regulations, interpretations or rulings thereunder.
6.13 Engage in any "prohibited transaction" within the meaning of Section
4975 of the Internal Revenue Code or Section 406 of ERISA with respect to any
"employee benefit plan," as defined in Section 3(3) of ERISA; or effect any
termination of any Plan which would result in a liability to Borrower.
6.14 Create, incur or assume any Debt other than (i) the Loans, (ii) the
Subordinated Notes, (iii) Debt disclosed in Financial Statements provided to the
Bank on or before the date hereof, (iv) Debt (other than Debt for money
borrowed) incurred in the ordinary course of
32
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business and which is not prohibited by the other provisions of this Agreement,
(v) new mortgage and Equipment financing Debt permitted pursuant to clause (H)
of the definition of "Permitted Liens", and (vi) Debt in the form of the
guarantee of Debt of FarmPro, Inc., a Pennsylvania corporation in an aggregate
amount not in excess of $6,000,000 at any time outstanding; and (vii) Debt under
the Stockholder Agreements; and Debt of Subsidiaries permitted under Section
6.05 not to exceed $5,000,000 at any time outstanding.
6.15 Enter into, or be a party to, any transaction with any Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
its business and upon fair and reasonable terms which are fully disclosed in
writing to the Bank and are no less favorable to such Person than would be
obtained in a comparable arm's length transaction with a person not an
Affiliate.
6.16 Maintain deposit accounts jointly with any Affiliate or commingle any
funds with funds of any Affiliate.
6.17 Change its fiscal year.
6.18 Amend or modify the terms of the Subordinated Notes or the Indenture.
ARTICLE VII. AFFIRMATIVE COVENANTS
---------------------
The Borrower covenants that until all Obligations of the Borrower are paid
and satisfied in full, and the Bank's obligations hereunder have terminated, the
Borrower will, and will cause each of its Subsidiaries to:
7.01 Furnish and deliver to the Bank:
(i) as soon as practicable, and in any event within 90 days after the end
of each fiscal year, (a) a statement of cash flows of the Borrower for
such year, (b) an income statement of the Borrower for such year and
(c) a balance sheet of the Borrower as of the end of such year; all in
reasonable detail, including all footnotes, and audited by certified
public accountants selected by the Borrower and reasonably acceptable
to the Bank and certified by such accountants to have been prepared in
accordance with GAAP, except for any inconsistencies explained in such
certificate;
(ii) as soon as practicable, and in any event within 30 days after the end
of each month commencing with the month ending November 30, 1997, (a)
a statement of cash flows of the Borrower for such month and the
portion of the fiscal year then ended, (b) an income statement of the
Borrower for such month and the portion of the fiscal year then ended
and (c) a balance sheet of the Borrower as of the end of such month;
all in reasonable detail and certified by an Authorized Borrower
33
<PAGE>
Representative as complete and accurate in all material respects,
fairly presenting the financial condition of the Borrower and
prepared in accordance with GAAP;
(iii) not later than 45 days after the end of each fiscal year, a
detailed budget for the 3 fiscal years next following, containing
monthly detail for the first of such 3 years, and annual detail for
the following years, and otherwise in form reasonably satisfactory
to Bank;
(iv) at the Closing, thereafter no later than 15 days after the end of
each month, and at such other times as Bank shall request, an
accounts receivable aging in form satisfactory to Bank;
(v) with each set of calendar quarterly Financial Statements delivered
hereunder, a certificate of an Authorized Borrower Representative
(a) calculating Borrower's compliance (or lack thereof) with the
financial covenants in Article VIII hereof, in reasonable detail,
and (b) stating that no Event of Default has occurred and is
continuing or if an Event of Default has occurred and is continuing
setting forth a description of such event and the steps being taken
to remedy such event;
(vi) immediately upon receipt thereof, copies of any management letters,
interim and supplemental reports submitted to the Borrower by
independent accountants in connection with any review of the books
of the Borrower made by such accountants;
(vii) at the time any independent accounting firm is engaged to perform
an audit or other services for Borrower, a letter reasonably
acceptable to Bank to the effect that Bank may rely on such firm's
work product;
(viii) upon request by the Bank, evidence satisfactory to the Bank of the
insurance coverages required under this Agreement; and
(ix) with reasonable promptness, such other information materially
concerning the business, properties, conditions or operations,
financial or otherwise, of the Borrower, or compliance by the
Borrower with any of the covenants in the Documents, as the Bank
may from time to time reasonably request.
7.02 Furnish and deliver to Bank:
(i) immediately after the occurrence thereof, notice of any Event of
Default or of any fact, condition or event that with the giving of
notice or passage of time or both, would reasonably be expected to
become an Event of Default, or of the failure by the Borrower to
observe any of its respective undertakings hereunder;
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<PAGE>
(ii) immediately after the occurrence thereof, notice of any default under
any Debt, or under any indenture, mortgage or other agreement
relating thereto for which the Borrower or any of its Subsidiaries is
liable;
(iii) immediately after obtaining knowledge thereof, notice of any
litigation or proceeding in which the Borrower or any of its
Subsidiaries is a party if the Borrower reasonably estimates that an
adverse decision therein would require the Borrower or any of its
Subsidiaries to pay over more than $500,000.00 or deliver assets the
value of which exceeds such sum (whether or not the claim is
considered to be covered by insurance);
(iv) immediately after receipt of notice thereof, notice of the
institution of any other suit or proceeding involving the Borrower or
any of its Subsidiaries that the Borrower reasonably determines could
materially and adversely affect the Borrower's business, properties
or financial condition; and
(v) immediately after the occurrence thereof, notice of any other matter
which has resulted in, or might result in, a materially adverse
change in the business, properties, or the financial condition of the
Borrower or any of its Subsidiaries.
7.03 Promptly pay and discharge when due all taxes, assessments and other
governmental charges imposed upon it, or upon its income, profits or property,
and all claims for labor, material or supplies which, if unpaid, might by law
become a lien or charge upon its property; provided, however, that it shall not
be required to pay any tax, assessment, charge or claim if so permitted by law,
so long as the validity thereof shall be contested in good faith by appropriate
proceedings and adequate reserves therefor in accordance with GAAP shall be
maintained on its books.
7.04 Maintain its inventory, equipment, real estate and other properties
in good condition and repair (normal wear and tear excepted), pay and discharge
or cause to be paid and discharged when due, the costs of repairs to or
maintenance of the same, and pay or cause to be paid all rental or mortgage
payments due on the same except if it is in good faith contesting by appropriate
proceedings such amounts due and is maintaining adequate reserves for such
liability in accordance with GAAP.
7.05 Maintain and comply with leases covering real property, if any, used
by it in accordance with the respective terms thereof so as to prevent any
default thereunder which may result in the exercise or enforcement of any
landlord's or other lien against it or its property; provided, however, that it
may contest any matters in connection with such leases in good faith and by
appropriate proceedings if it makes such payments as are required by law and
maintains adequate reserves on its books in accordance with GAAP in connection
therewith.
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7.06 Maintain its corporate existence, maintain all rights, privileges,
franchises, permits and approvals necessary or desirable for the continuation of
its business, and comply with the requirements of all material agreements to
which it is a party or by which any of its assets is bound, and all applicable
Laws, including Environmental Laws, and orders of any Governmental Authority,
noncompliance with which would materially adversely affect its business,
properties or financial condition, or ability to repay its Obligations.
7.07 Keep adequate records and books of account and inventory, in which
complete entries will be made in accordance with its past practices and
consistent with sound business practice, reflecting all of its financial
transactions, and collect its accounts only in the ordinary course of business.
7.08 Permit any of the Bank's representatives to examine and inspect the
Collateral, its business premises, all other of its properties and operations,
and all books of account, records, reports and other papers and to make copies
and extracts therefrom, and to discuss its affairs, finances and accounts with
its officers and employees or its independent public accountants (and by this
provision the Borrower authorizes said accountants to discuss the finances and
affairs of the Borrower and its Subsidiaries), all at such reasonable times and
as often as may be reasonably requested. The Borrower shall pay all of Bank's
reasonable expenses incurred in connection with such examinations and
inspections.
7.09 Pay when due all of its Debt except if (with respect to Debt other
than the Obligations) it is in good faith contesting by appropriate proceedings
such amounts due and has maintained adequate reserves for such liability in
accordance with GAAP.
7.10 At all times make prompt payment of contributions required to meet
the minimum funding standards set forth in ERISA with respect to each of its
Plans; promptly after the filing thereof, furnish to the Bank copies of any
annual report required to be filed pursuant to ERISA in connection with each
Plan; notify the Bank as soon as practicable of any Reportable Event and of any
additional act or condition arising in connection with any Plan which might
constitute grounds for the termination thereof by PBGC or for the appointment by
the appropriate United States district court of a trustee to administer any
Plan; and furnish to the Bank, promptly upon the Bank's request therefor, such
additional information concerning any "employee benefit plan," as defined in
Section 3(3) of ERISA, as may be reasonably requested by the Bank.
7.11 At the Bank's request, execute and/or deliver to the Bank, at any
time or times hereafter, all Supplemental Documentation that the Bank may
request, in form and substance acceptable to the Bank, and pay the costs of any
recording or filing of the same. The Borrower hereby irrevocably makes,
constitutes and appoints the Bank (and all Persons designated by the Bank for
that purpose) as Borrower's true and lawful attorney, effective immediately upon
the failure or refusal of the Borrower to execute and/or deliver to the Bank any
Supplemental Documentation required hereby, to sign the name of the Borrower on
any of the Supplemental Documentation and to deliver any of the Supplemental
Documentation to such Persons as the
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Bank, in its sole discretion, may elect. The Borrower agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement and may be filed by
the Bank in any filing office.
7.12 Maintain, in addition to the insurance on Collateral required
pursuant to Section 4.09 above, (i) liability insurance in form, with insurers
and in amounts as may be satisfactory to the Bank, showing the Bank as an
additional insured, and (ii) fidelity bonds and such other insurance in form,
with insurers and in amounts as may be satisfactory to the Bank.
7.13 Maintain its principal banking accounts with the Bank.
ARTICLE VIII. FINANCIAL COVENANTS
-------------------
The Borrower covenants that until all Obligations of Borrower have been
paid and satisfied in full, and the Bank's obligations hereunder have
terminated, the Borrower on a consolidated basis with its subsidiaries will:
8.01 Have and maintain at all times in respect of any period of four
consecutive calendar quarters ending with a calendar quarter in each year listed
below a Funded Debt to EBITDA Ratio of not greater than 5 to 1 in 1997 and 1998,
4.75 to 1 in 1999 and 4.50 to 1 in 2000.
8.02 Have and maintain at all times a Fixed Charge Coverage Ratio of not
less than 1.50 to 1.
8.03 Have in respect of any period of four consecutive calendar quarters
EBITDA of not less than $18,000,000.
ARTICLE IX. EVENTS OF DEFAULT
-----------------
9.01 The occurrence of any of the following events or acts shall
constitute an Event of Default ("Event of Default"):
(A) The Borrower defaults in the payment of any of its Obligations or any
part thereof when the same shall become due and payable, either by their terms
or as otherwise herein provided, and such default continues uncured for a period
of two days.
(B) Any Financial Statement, representation or warranty made by the
Borrower herein or delivered by the Borrower pursuant hereto or otherwise made
in writing by the Borrower in connection with this Agreement proves to have been
false in any material respect as of the date on which it was made or deemed
made; the Borrower shall default in performance of any of the covenants set
forth in Article VII of this Agreement (other than those set forth in Sections
7.01 and 7.02), and such default shall continue uncured for a period of 30 days
following the earlier
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of (i) notice from Bank to Borrower, or (ii) the day on which Borrower otherwise
becomes aware of same; or the Borrower defaults in the performance of any of the
other covenants, conditions or agreements contained in this Agreement.
(C) The Borrower or any of its Subsidiaries suffers to exist any event of
default (other than an event of default which is wrongly asserted by the other
party and which the Borrower is contesting in good faith) under any agreement
binding the Borrower or any of its Subsidiaries and involving an obligation in
excess of $500,000.00, and such event of default continues beyond any applicable
grace period.
(D) The Borrower or any of its Subsidiaries files a petition under any
section or chapter of the United States Bankruptcy Code or any similar federal
or state law or regulation, the Borrower or any of its Subsidiaries admits its
inability to pay debts as they mature, the Borrower or any of its Subsidiaries
makes an assignment for the benefit of one or more of its creditors, the
Borrower or any of its Subsidiaries makes an application for the appointment of
a receiver, trustee or custodian for any of its assets, or the Borrower or any
of its Subsidiaries files any case or proceeding for its reorganization,
dissolution or liquidation or for relief from creditors.
(E) The Borrower or any of its Subsidiaries is enjoined, restrained or in
any way prevented by court order from conducting all or any material part of its
business affairs, a petition under any section or chapter of the United States
Bankruptcy Code or any similar federal or state law or regulation is filed
against the Borrower or any of its Subsidiaries, any case or proceeding is filed
against the Borrower or any of its Subsidiaries for its reorganization,
dissolution or liquidation or for creditor relief, or an application is made by
any Person other than the Borrower or any of its Subsidiaries for the
appointment of a receiver, trustee, or custodian for any of the Borrower's or
any of its Subsidiaries' assets, and such injunction, restraint, petition or
application is not dismissed or stayed within thirty (30) days after the entry
or filing thereof.
(F) The Borrower or any of its Subsidiaries conceals or removes or permits
to be concealed or removed any part of its property with intent to hinder, delay
or defraud its creditors or any of them, or makes or suffers to be made a
transfer of any of its property that may be fraudulent under any federal or
state bankruptcy, fraudulent conveyance or similar law.
(G) The Borrower or any of its Subsidiaries permits any of its assets to
be attached, seized, subjected to a writ or distress warrant, or levied upon, or
to come within the possession of any receiver, trustee, custodian or assignee
for the benefit of creditors and does not cause the same to be terminated within
thirty (30) days thereafter.
(H) Other than Permitted Liens, a notice of any charge is filed of record
with respect to all or any of the Borrower's or any of its Subsidiaries' assets
or any charge becomes a lien or encumbrance upon any such assets and the same is
not released within thirty (30) days after the same becomes a lien or
encumbrance.
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(I) The occurrence of any of the following events: (i) the happening of a
Reportable Event with respect to any Plan which the Bank determines in good
faith might constitute grounds for the termination by the PBGC of such Plan or
for the appointment by the appropriate United States district court of a trustee
to administer such Plan; (ii) any Plan which is not "sufficient for benefit
liabilities" (as determined under Section 4041(d)(1) of ERISA) shall be
terminated; (iii) the Borrower, any of its Subsidiaries or any ERISA Affiliate
shall effect a complete or partial withdrawal from any Multiemployer Plan
without the prior written consent of the Bank and shall have a withdrawal
liability (as determined under the Multiemployer Pension Plan Amendments Act of
1980); (iv) the Borrower, any of its Subsidiaries or any ERISA Affiliate shall,
without the prior written consent of the Bank, withdraw from a Plan under which
liability may be imposed pursuant to Section 4063 of ERISA; (v) the appointment
of a trustee by an appropriate United States district court to administer any
Plan; or (vi) the institution of any proceedings by the PBGC to terminate any
Plan or to appoint a trustee to administer any Plan.
(J) The Borrower or any of its Subsidiaries suffers a final judgment for
payment of money which shall not be on appeal and does not discharge the same
within a period of thirty (30) days.
(K) A judgment creditor of the Borrower obtains possession of any
Collateral by any means, including without limitation, levy, distraint, replevin
or self-help.
(L) The occurrence of a default or an Event of Default under any of the
other Documents which is not cured within the time, if any, specified therefor
in such other Document; or the actual or attempted unilateral termination,
modification or abrogation by any Person other than the Bank of any obligation
under, or of any right or remedy of Bank under, any of the Documents.
(M) John C. Sloan fails to own directly, beneficially and of record
greater than 50% of each class of the issued and outstanding voting Stock of the
Borrower.
(N) The occurrence of an "Event of Default" under the Subordinated Notes,
the Indenture, or the DMC Revolving Credit Note.
9.02 Upon the occurrence of any Event of Default, and at any and all times
while any Event of Default shall be continuing, the Bank shall have all rights
and remedies provided by this Agreement or any other Document and by applicable
law and, without limiting the generality of the foregoing, may, at its option,
declare the Revolving Credit Loan Commitment to be terminated by giving written
notice thereof to the Borrower, and upon such declaration, all Obligations of
the Borrower shall thereupon be and become forthwith, due and payable, without
any presentment, demands, protest or other notice of any kind, all of which are
hereby expressly waived. Further, in addition to all the rights and remedies
provided in Article 9 of the UCC and any other applicable law, the Bank may (but
is under no obligation to do so): take physical possession of any of the
Collateral and sell, lease or otherwise dispose of the Collateral in whole or in
part;
39
<PAGE>
require the Borrower to assemble the Collateral to which the Borrower has or is
entitled to possession at a place designated by the Bank, which is reasonably
convenient to both parties; collect any money due or to become due and enforce
in the Borrower's name all rights with respect to the Collateral; receive and
open mail addressed to the Borrower; and/or notify any Account Debtors (whether
or not such Account Debtors are in default) to make payments directly to the
Bank. The Borrower agrees to deliver to the Bank promptly upon receipt thereof,
in the form in which received (together with all necessary endorsements), all
payments received by the Borrower in respect of any Account. The Bank may apply
all such payments against the Borrower's Obligations or at the Bank's option to
any of the Borrower's accounts maintained at the Bank.
9.03 In exercising its right to sell, lease or otherwise dispose of the
Collateral, the Bank may sell, lease or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, all as the Bank, in its sole discretion,
may deem advisable; such sales may be adjourned from time to time with or
without notice. The Bank shall have the right to conduct such sales on the
Borrower's premises or elsewhere and shall have the right to use the Borrower's
premises without charge for such sales for such time or times as the Bank may
see fit. The Bank is hereby granted a license or other right to use, without
charge, the Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, tradenames, trademarks, service marks and advertising matter, or
any property of a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral and the Borrower's rights under
all licenses and all franchise agreements shall inure to the Bank's benefit.
The Bank shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination thereof,
and the Bank may purchase all or any part of the Collateral at public or, if
permitted by law, private sale and, in lieu of actual payment of such purchase
price, may set off the amount of such price against the Borrower's Obligations.
The proceeds realized from the sale of any Collateral shall be applied first to
the costs, expenses and attorneys' fees and expenses incurred by the Bank for
collection and for acquisition, completion, protection, removal, storage, sale
and delivery of the Collateral; second to interest due upon any of the
Borrower's Obligations; and third to the principal of the Borrower's
Obligations. If any deficiency shall arise, the Borrower shall remain liable to
the Bank therefor.
9.04 Any notice of any sale, lease, other disposition, or other intended
action by the Bank shall be reasonable if it is given to the Borrower at least
ten (10) days in advance of the intended disposition or other intended action.
9.05 Upon and after the occurrence of an Event of Default, the Borrower
irrevocably designates, makes, constitutes and appoints the Bank (and all
persons designated by the Bank) as the Borrower's true and lawful attorney, and
the Bank or its agent, may, without notice to the Borrower, and at such time or
times thereafter as the Bank or said agent, in its sole discretion, may
determine, in the Borrower's or the Bank's name: (i) demand payment of the
Accounts; (ii) enforce payment of the Accounts, by legal proceedings or
otherwise; (iii) exercise all of the
40
<PAGE>
Borrower's rights and remedies with respect to the collection of the Accounts
and Special Collateral; (iv) settle, adjust, compromise, extend or renew the
Accounts; (v) settle, adjust or compromise any legal proceedings brought to
collect the Accounts or any other dispute with respect thereto; (vi) if
permitted by applicable law, sell or assign the Accounts and Special Collateral
upon such terms, for such amounts and at such time or times as the Bank deems
advisable; (vii) discharge and release the Accounts and Special Collateral;
(viii) prepare, file and sign the Borrower's name on a Proof of Claim in
Bankruptcy or similar document against any Account Debtor; (ix) prepare, file
and sign the Borrower's name on any notice of lien, assignment or satisfaction
of lien or similar document in connection with the Accounts and Special
Collateral; (x) do all acts and things necessary, in the Bank's sole discretion,
to fulfill the Borrower's obligations under this Agreement; (xi) endorse the
name of the Borrower upon any item of payment or proceeds and deposit the same
to the account of the Bank on account of the Borrower's Obligations; (xii)
endorse the name of the Borrower upon any chattel paper, document, instrument,
invoice, freight bill, bill of lading or similar document or agreement relating
to the Accounts, Inventory and Special Collateral; (xiii) use the Borrower's
stationery and sign the name of the Borrower to verifications of the Accounts
and notices thereof to Account Debtors; and (xiv) use the information recorded
on or contained in any data processing equipment and computer hardware and
software relating to the Accounts, Inventory and Special Collateral to which the
Borrower has access.
9.06 The Borrower agrees that in any sale of Collateral consisting of
securities, the Bank is hereby authorized to comply with any limitation or
restriction in connection with such sale as Bank may be advised by counsel is
necessary or advisable in order to avoid any violation of applicable Law
(including, without limitation, compliance with such procedures as may restrict
the number of prospective bidders and purchasers, require that such prospective
bidders and purchasers have certain qualifications, and restrict such
prospective bidders and purchasers to Persons who will represent and agree that
they are purchasing for their own account for investment and not with a view to
the distribution or resale of that portion of the Collateral consisting of
securities), or in order to obtain any required approval of the sale or of the
purchaser by any governmental regulatory authority or official, and the Borrower
further agrees that such compliance shall not result in such sale being
considered commercially unreasonable, nor shall the Bank be liable or
accountable to the Borrower for any discount allowed by reason of the fact that
Collateral was sold in compliance with any such limitation or restriction.
ARTICLE X. MISCELLANEOUS
-------------
10.01 No failure or delay on the part of the Bank in exercising any right,
power or remedy hereunder or under any other Documents shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder or under any other Document. The
remedies herein provided and under any other Document are cumulative and not
exclusive of any remedies provided by law.
41
<PAGE>
10.02 This Agreement and the other Documents constitute the entire
agreement between the parties and there are no promises expressed or implied
unless contained herein and therein. No amendment, modification, termination or
waiver of any provision of the Documents nor consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be in
writing and signed by the Bank, and then such waiver or consent shall be
effective only for the specific purpose for which given, and shall not be deemed
a waiver of or consent to any other matter or to the same matter in a different
instance. No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances.
10.03 The Borrower will pay any documentary, stamp or similar taxes
payable in respect of the Documents or the Collateral granted hereby or in
connection herewith. The Borrower will, on demand, reimburse the Bank for the
fees and expenses of legal counsel for the Bank incurred by the Bank in
connection with the preparation of the Documents, and the negotiation and
closing of the transactions contemplated hereby. The Borrower will further, on
demand, reimburse the Bank for all expenses, including the fees and expenses of
legal counsel for the Bank, incurred by the Bank in connection with any
amendment or modification of the Documents, the administration of the Loans and
the enforcement of the Documents and the collection or attempted collection of
the Obligations of the Borrower.
10.04 (A) For the purposes of any action or proceeding involving the
Documents or any other agreement or document referred to therein, the Borrower
hereby expressly submits to the jurisdiction of all federal and state courts
located in the State of Illinois and consents that any order, process, notice of
motion or other application to or by any of said courts or a judge thereof may
be served within or without such court's jurisdiction by registered mail or by
personal service, provided a reasonable time for appearance is allowed. The
Borrower hereby irrevocably waives any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or any other Document brought in any federal or state
court sitting in Cook County, State of Illinois, and hereby further irrevocably
waives any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
(B) THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
(TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT, THE NOTES, ANY
OTHER OF THE DOCUMENTS OR ANY OTHER AGREEMENT OR DOCUMENT REFERRED TO HEREIN OR
THEREIN AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING
WITHOUT A JURY.
10.05 The Borrower agrees to indemnify the Bank from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
(including, without limitation, fees and disbursements of
42
<PAGE>
counsel) which may be imposed on, incurred by, or asserted against the Bank in
any litigation, proceeding or investigation instituted or conducted by any
governmental agency or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement or the Stock Redemption Agreement, whether or not the
Bank is a party thereto, except to the extent that any of the foregoing arises
out of the gross negligence or wilful misconduct of the Bank.
10.06 The Borrower acknowledges and agrees that this Agreement constitutes
a commitment on the part of the Bank to make advances, incur obligations and
otherwise to give value to the Borrower and that all financing statements filed
hereunder shall remain in full force and effect until this Agreement shall have
been terminated even if, at any time or times prior to such termination, no
Loans or other Obligations shall be outstanding hereunder. Accordingly, the
Borrower waives any rights which it may have under Section 9-404(1) of the UCC
to demand the filing of termination statements with respect to the Collateral,
and agrees that the Bank shall not be required to send such termination
statements to the Borrower, or to file them with any filing office, unless and
until this Agreement shall have been terminated and all Obligations of the
Borrower shall have been paid in full in immediately available funds.
10.07 Any notices or consents required or permitted by this Agreement
shall be in writing and shall be delivered in person or sent by certified mail,
postage prepaid, return receipt requested, or delivered by facsimile, or
delivered by a nationally recognized overnight express delivery service, in any
case addressed as follows, unless such address is changed by written notice
hereunder:
(i) If to the Borrower:
The GSI Group, Inc.
1004 East Illinois Street
Assumption, Illinois 62510
Attention: Chief Executive Officer
FAX: (217) 226-4439
With a copy to:
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The GSI Group, Inc.
1004 East Illinois Street
Assumption, Illinois 62510
Attention: General Counsel
FAX: (217) 226-4439
(ii) If to the Bank:
LaSalle National Bank
Metropolitan Division
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Charles Schroeder
FAX: (312) 904-6353
With a copy to:
Rooks, Pitts and Poust
10 South Wacker Drive
Suite 2300
Chicago, Illinois 60606
Attention: Jeffrey M. Dalebroux, Esq.
FAX: (312) 876-1155
Any such notice or communication shall be deemed to have been given either at
the time of personal delivery, or in the case of overnight express delivery, as
of the date delivery was first attempted, or in the case of facsimile, upon
receipt or in the case of certified mail, five (5) days after delivery to the
United States Postal Service.
10.08 This Agreement may be executed in any number of counterparts and by
the different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
10.09 This Agreement shall become effective when it shall have been
executed by the Borrower and the Bank, and thereafter shall be binding upon and
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank.
44
<PAGE>
10.10 This Agreement has been, and any other Documents will be, delivered
and accepted in and shall be deemed to be, contracts made under and governed by
the laws of the State of Illinois, and for all purposes shall be construed in
accordance with the laws of said State.
10.11 Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction; wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable Law.
10.12 All covenants, agreements, representations and warranties made by
the Borrower herein and any and all certificates and instruments delivered by
the Borrower in connection herewith shall, notwithstanding any investigation by
the Bank, be deemed material and relied on by the Bank and shall survive the
execution and delivery to the Bank of this Agreement, the Notes, the other
Documents, and any extension or renewal thereof.
10.13 This Agreement shall secure and govern the terms of any amendments,
extensions or renewals to either or both of the Notes.
10.14 From time to time, the Borrower will execute and deliver to Bank
such additional documents and will provide such additional information as the
Bank may reasonably require to carry out the terms of this Agreement and be
informed of the Borrower's status and affairs.
10.15 All Exhibits and Schedules attached to this Agreement shall be
deemed incorporated herein by this reference.
10.16 Whenever under the terms of this Agreement, the time for performance
of a covenant or condition falls upon a day which is not a Business Day, such
time for performance shall be extended to the next Business Day. Unless
otherwise stated, all references herein to "days" shall mean calendar days.
10.17 This Agreement and the other Documents supersede all prior
negotiations, understandings and agreements of the parties hereto and thereto in
respect of the transactions contemplated hereby, including without limitation
those expressed in any commitment or proposal letter.
10.18 Borrower hereby unconditionally and irrevocably guarantees the full
and punctual payment (whether at stated maturity, upon acceleration or
otherwise) of the principal of and interest on the DMC Revolving Credit Note
issued by the Subsidiary Borrowers pursuant to this Agreement, and the full and
punctual payment of all other amounts payable by each of the Subsidiary
Borrowers under this Agreement. Upon failure by any Subsidiary Borrower to pay
punctually any such amount, Borrower shall forthwith on demand pay the amount
not so paid at the place and in the manner specified in this Agreement. In
addition (and without limiting the foregoing), upon the DMC
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<PAGE>
Revolving Credit Loan of the Subsidiary Borrowers being declared or otherwise
becoming immediately due and payable, Borrower shall forthwith on demand pay all
amounts payable under such DMC Revolving Credit Loan at the place and in the
manner specified in this Agreement.
10.19 The obligations of Borrower under Section 10.18 shall be
unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of any Subsidiary Borrower under this Agreement or the
DMC Revolving Credit Note, by operation of law or otherwise;
(b) any modification or amendment of or supplement to this Agreement or
the DMC Revolving Credit Note;
(c) any release, impairment, non-perfection or invalidity of any direct or
indirect security for any obligation of any Subsidiary Borrower under this
Agreement or any Document or the DMC Revolving Credit Note;
(d) any change in the corporate existence, structure or ownership of any
Subsidiary Borrower or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting any Subsidiary Borrower or such Subsidiary
Borrower's assets or any resulting release or discharge of any obligation of any
Subsidiary Borrower contained in this Agreement or the DMC Revolving Credit
Note;
(e) the existence of any claim, set-off or other right which Borrower may
have at any time against any Subsidiary Borrower, or any other Person, whether
in connection herewith or any unrelated transaction, provided that nothing
herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against any
Subsidiary Borrower for any reason of this Agreement or the DMC Revolving Credit
Note, or any provision of applicable law or regulation purporting to prohibit
the payment by any Subsidiary Borrower of the principal of or interest on the
DMC Revolving Credit Note or any other amount payable by any Subsidiary Borrower
under this Agreement or the DMC Revolving Credit Note; or
(g) any other act or omission to act or delay of any kind by any
Subsidiary Borrower or any other person or any other circumstance whatsoever
which might, but for the provisions of this paragraph, constitute a legal or
equitable discharge of Borrower's obligations as guarantor hereunder.
10.20 Borrower's obligations as guarantor hereunder shall remain in full
force and effect until the Revolving Credit Loan Commitment shall have
terminated and all Obligations of the Subsidiary Borrowers under this Agreement
and the DMC Revolving Credit Note shall have been paid in full. If any time any
payment of principal, interest or any other amount payable by any
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<PAGE>
Subsidiary Borrower under this Agreement or the DMC Revolving Credit Note is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of such Subsidiary Borrower or otherwise,
Borrower's obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.
10.21 Borrower irrevocably waives acceptance hereof, presentment, demand,
protest and any notice not provided for herein, as well as any requirement that
at any time any action be taken by any Person against any Subsidiary Borrower or
any other Person.
10.22 Notwithstanding any payment made by or for the account of any
Subsidiary Borrower pursuant to this Agreement, Borrower shall not be subrogated
to any right of the Bank until such time as the Bank shall have received final
payment in cash of the full amount of all Obligations.
10.23 If acceleration of the time for payment of any amount payable by any
Subsidiary Borrower under this Agreement or the DMC Revolving Credit Note is
stayed upon the insolvency, bankruptcy or reorganization of such Subsidiary
Borrower, all such amounts otherwise subject to acceleration under the terms of
this Agreement shall nonetheless be payable by Borrower hereunder forthwith on
demand by the Bank.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE GSI GROUP, INC.
By: /s/ Craig Sloan
-------------------------
Title: CEO
----------------------
LASALLE NATIONAL BANK
By: /s/ Charles E. Schroeder
-------------------------
Title: 1st Vice President
----------------------
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Exhibit and Schedule Index
--------------------------
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of DMC Revolving Credit Note
Schedule 1 - Certain Permitted Liens
Schedule 2 - Collateral Locations and Places of Business
Schedule 3 - Trade Names, etc.
Schedule 4 - Intellectual Property
Schedule 5 - Stock Ownership
49
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SUBSTITUTE REVOLVING CREDIT NOTE
--------------------------------
$40,000,000.00 Chicago, Illinois
November 5, 1997
FOR VALUE RECEIVED, The GSI Group, Inc., a Delaware corporation ("Maker"),
promises to pay to the order of LaSalle National Bank, a national banking
association ("Bank"), at its offices at 135 South LaSalle Street, Chicago,
Illinois 60603 or at such other place as the holder of this Note may designate
in writing to the Maker, on or before October 31, 2000, the principal sum of
Forty Million Dollars ($40,000,000.00), or, if less, the aggregate amount of the
Revolving Credit Loans advanced and unpaid pursuant to a certain Second Amended
and Restated Loan and Security Agreement made by and between the Maker and the
Bank dated as of even date herewith, as the same may be amended from time to
time (the "Loan Agreement"), the terms of which are incorporated by reference
and made a part of this Note as though fully set out herein. Capitalized terms
used and not otherwise defined herein shall have the meanings ascribed to such
terms in the Loan Agreement. The amount advanced and outstanding under the Loan
Agreement as shown on the books and records of the Bank shall be considered
correct and conclusively binding on the Maker absent manifest error.
The Maker further promises to pay interest on the Revolving Credit Loans as
provided in the Loan Agreement.
All payments received from the Maker hereunder shall be applied by the Bank
in accordance with the terms of the Loan Agreement.
This Note and any renewals and extensions hereof, and any other Obligations
of the undersigned to the Holder hereof (the term "Holder" shall include the
Bank and any subsequent holder hereof) due or to become due, now existing or
hereafter contracted, and howsoever acquired by the Holder, are secured in the
manner described in the Loan Agreement.
This Note is issued under the Loan Agreement and this Note and the Holder
are entitled to all of the benefits provided for by the Loan Agreement or
referred to therein, to which Loan Agreement reference is made for a statement
thereof. Pre-payments may be made hereon only at the times, in the events and
in the manner provided in the Loan Agreement.
All unpaid amounts owing on this Note or on any other Obligations
immediately shall become due and payable at the option of the Holder, without
notice or demand, upon the occurrence of any Event of Default.
In the event of default in the payment of any sums due under this Note, the
Maker hereby agrees that the Bank may offset all money, bank or other deposits
or credits now or hereafter held by the Bank or owed by the Bank to Maker
against all amounts due under this Note or against any other amounts which may
be due the Bank from the Maker.
<PAGE>
No clause or provision contained in this Note or any documents related
hereto shall be construed or shall so operate (a) to raise the interest rate set
forth in this Note above the lawful maximum, if any, in effect from time to time
in the applicable jurisdiction for loans to borrowers of the type, in the
amount, for the purposes, and otherwise of the kind contemplated, or (b) to
require the payment or the doing of any act contrary to law, but if any clause
or provision contained shall otherwise so operate to invalidate this Note, in
whole or in part, then (i) such clauses or provisions shall be deemed modified
to the extent necessary to be in compliance with the law, or (ii) to the extent
not possible, shall be deemed void as though not contained and the remainder of
this Note and such document shall remain operative and in full force and effect.
All makers and any endorsers, guarantors, sureties, accommodation parties
and all other persons liable or to become liable for all or any part of this
indebtedness, jointly and severally waive diligence, presentment, protest and
demand, and also notice of protest, of demand, of nonpayment, of dishonor and of
maturity and also recourse or suretyship defenses generally; and they also
jointly and severally hereby consent to any and all renewals, extensions or
modifications of the terms of this Note, including time for payment, and further
agree that any such renewals, extension or modification of the terms of this
Note or the release or substitution of any security for the indebtedness under
this Note or any other indulgences shall not affect the liability of any of the
parties for the indebtedness evidenced by this Note. Any such renewals,
extensions or modifications may be made without notice to any of said parties.
The Maker shall be liable to the Holder for all costs and expenses incurred
in connection with collection, whether by suit or otherwise, of any amount due
under this Note, including, without limitation, reasonable attorneys' fees, as
more fully set forth in the Loan Agreement.
This Note shall be governed by and construed in accordance with the laws of
the State of Illinois.
This Note evidences Senior Indebtedness and Designated Senior Indebtedness
under the terms of that certain Indenture dated November 5, 1997 between Maker
and LaSalle National Trust, N.A., as trustee regarding Maker's $100,000,000
aggregate principal amount of 10.25% Senior Subordinated Notes due 2007.
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<PAGE>
This Note is delivered in substitution for, but not in payment of, that
certain Revolving Credit Note made by Maker in the original principal amount of
$50,000,000 and dated April 14, 1997 (the "Old Note"). All amounts outstanding
under the Old Note are deemed outstanding hereunder.
THE GSI GROUP, INC.
By: /s/ Craig Sloan
--------------------
Title: CEO
-----------------
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<PAGE>
EXHIBIT 10.2
GUARANTY
--------
FOR VALUE RECEIVED, and in consideration of any loans, advances,
payments, extensions of credit and/or other financial accommodations heretofore,
now or hereafter made, granted or extended by Mercantile Bank National
Association, a national banking association, its successors and assigns
("Lender"), or which Lender has or will become obligated to make, grant or
extend, to or for the account of FarmPRO, Inc., a Pennsylvania corporation
("Borrower"), and in consideration of any obligations heretofore, now or
hereafter incurred by Borrower to Lender, the undersigned, The GSI Group, Inc.,
a Delaware corporation (the "Guarantor"), hereby absolutely and unconditionally
guarantees to Lender the prompt and complete payment when due in accordance with
their respective terms (whether by reason of demand, maturity, acceleration or
otherwise) of any and all of the present and future "Borrower's Obligations" (as
defined in that certain Loan Agreement dated the date hereof by and between
Borrower and Lender, as the same may from time to time be amended, modified,
extended or renewed (the "Loan Agreement")) (collectively, the "Guaranteed
Indebtedness"); provided, however, that the Guaranteed Indebtedness shall not
include (a) any portion of the Borrower's Obligations consisting of principal
(and not interest, fees or collection costs and expenses) (the "Principal
Portion of the Borrower's Obligations") which is incurred by Borrower after
November 26, 1998, or (b) the Principal Portion of the Borrower's Obligations
which is in excess of $6,000,000.00, if any. In addition, the Guarantor shall
and agrees to be liable to Lender for all costs and expenses incurred by Lender
in attempting or effecting collection hereunder (whether or not litigation shall
be commenced in aid thereof) and in connection with representation of Lender in
connection with bankruptcy or insolvency proceedings relating hereto, including,
without limitation, reasonable attorneys' fees and expenses.
Notice of the acceptance of this Guaranty, and of the incurrence of
any of the Guaranteed Indebtedness, and presentment, demand for payment, notice
of dishonor, protest, notice of protest and of default by Borrower are hereby
waived by the Guarantor who agrees: (i) that this Guaranty is a guaranty of
payment and not of collection and the obligations of the Guarantor hereunder may
be enforced directly against the Guarantor independently of and without
proceeding against Borrower or any other guarantor(s) of any or all of the
Guaranteed Indebtedness or foreclosing any collateral pledged to Lender; (ii)
that Lender in its sole and absolute discretion may from time to time extend the
time of payment, change the interest rates and renew or change the manner,
place, time and terms of payment of and make any other changes with respect to
any or all of the Guaranteed Indebtedness; (iii) that Lender may from time to
time in its sole and absolute discretion sell, exchange, release, surrender and
otherwise deal with any collateral pledged to Lender by Borrower or any other
person or entity to secure any or all of the Guaranteed Indebtedness; (iv) that
Lender may from time to time in its sole and absolute discretion release and
otherwise deal with any other guarantor(s) of any or all of the Guaranteed
Indebtedness; and (v) that Lender may from time to time exercise or refrain from
exercising any rights against Borrower or any other guarantor(s) of any or all
of the Guaranteed Indebtedness and otherwise act or refrain from acting with
respect to Borrower or any other guarantor(s) of any or all of the Guaranteed
Indebtedness, and may from time to time settle or compromise any or all of the
Guaranteed Indebtedness with Borrower; all without notice to or consent of the
Guarantor and without releasing the Guarantor.
The Guarantor shall have no right of subrogation, reimbursement,
contribution or indemnity whatsoever with respect to Borrower or any other
guarantor(s) of any or all of the Guaranteed Indebtedness and no right of
recourse to or with respect to any assets or property of Borrower or any other
guarantor(s) of any or all of the Guaranteed Indebtedness or to any collateral
or other security
<PAGE>
for the payment of any of the Guaranteed Indebtedness unless and until all of
the Guaranteed Indebtedness shall have been fully, finally and indefeasibly paid
in cash and all of the financing arrangements and commitments between Borrower
and Lender have been terminated. Nothing shall discharge or satisfy the
liability of the Guarantor under this Guaranty except the full performance and
payment of all of the Guaranteed Indebtedness and all obligations of the
Guarantor under this Guaranty.
Lender's books and records showing the account between Lender and
Borrower shall be admissible in evidence in any action or proceeding and shall
constitute prima facie proof of the items therein set forth.
No invalidity, irregularity or unenforceability of any or all of the
Guaranteed Indebtedness or of any collateral or any other guarantees therefor
shall affect, impair or be a defense to this Guaranty. The liability of the
Guarantor under this Guaranty shall in no way be affected or impaired by any
acceptance by Lender of any collateral for or other guarantees of any of the
Guaranteed Indebtedness, or by any failure, neglect or omission on the part of
Lender to realize upon or protect any of the Guaranteed Indebtedness or any
collateral therefor or guarantees thereof. No act of commission or omission of
any kind by Lender (including, without limitation, any act or omission which
impairs, reduces the value of, releases or fails to perfect a lien upon, any
collateral for or guarantee of any of the Guaranteed Indebtedness) shall affect
or impair the obligations or the Guarantor under this Guaranty in any manner.
If claim is ever made on Lender for repayment or recovery of any
amount or amounts received by Lender in payment or on account of any of the
Guaranteed Indebtedness (including payment under a guaranty or from application
of collateral) and Lender repays all or part of said amount by reason of (a) any
judgment, decree or order of any court or administrative body having
jurisdiction over Lender or any of Lender's property or (b) any settlement or
compromise of any such claim effected by Lender with any such claimant
(including, without limitation, Borrower), then and in such event the Guarantor
agrees that any such judgment, decree, order, settlement or compromise shall be
binding on the Guarantor, notwithstanding any cancellation of any note or other
instrument or agreement evidencing such Guaranteed Indebtedness or of this
Guaranty, and the Guarantor shall be and remain liable to Lender hereunder for
the amount so repaid or recovered to the same extent as if such amount had never
originally been received by Lender. This Guaranty shall continue to be effective
or be reinstated, as the case may be, if (i) at any time any payment of any of
the Guaranteed Indebtedness is rescinded or must otherwise be returned by Lender
upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, all
as though such payment had not been made or (ii) this Guaranty is released or
the liability of the Guarantor hereunder is reduced in consideration of a
payment of money or transfer of property or grant of a security interest by the
Guarantor or any other person or entity and such payment, transfer or grant is
rescinded or must otherwise be returned by Lender upon the insolvency,
bankruptcy or reorganization of such person or entity or otherwise, all as
though such payment, transfer or grant had not been made.
The Guarantor hereby represents and warrants to Lender that (a) the
Guarantor is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, (b) the execution, delivery and
performance by the Guarantor of this Guaranty (i) are within the corporate
powers of the Guarantor, (ii) have been duly authorized by all necessary
corporate action on the part of the Guarantor, (iii) require no action by or in
respect of, consent or approval of or filing or recording with, any governmental
or regulatory body, agency
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<PAGE>
or official or any other third party and (iv) do not conflict with, or result in
a breach of the terms, conditions or provisions of, or constitute a default
under or result in any violation of, the terms of the Certificate or Articles of
Incorporation or Bylaws of the Guarantor, any applicable law, rule, regulation,
order, writ, judgment or decree of any court or governmental or regulatory
agency or instrumentality or any agreement, document or instrument to which the
Guarantor is a party or by which it is bound or to which it is subject and (c)
this Guaranty constitutes the legal, valid and binding obligation of the
Guarantor and is enforceable against the Guarantor in accordance with its terms,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
No delay by Lender in exercising any of its options, powers or rights
or partial or single exercise thereof shall constitute a waiver thereof. No
waiver of any of Lender's rights hereunder and no modification or amendment of
this Guaranty shall be deemed to be made by Lender unless the same shall be in
writing, duly signed on Lender's behalf, and each such waiver (if any) shall
apply only with respect to the specific instance involved and shall in no way
impair Lender's rights or the obligations of the Guarantor to Lender in any
other respect at any other time. In the event any one or more of the provisions
contained in this Guaranty should be invalid, illegal or enforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Guaranty shall not be affected or impaired thereby.
All payments made under or pursuant to this Guaranty may be allocated
among the principal, interest and other portions of the Guaranteed Indebtedness
and the other obligations of the Guarantor hereunder in such order as Lender may
determine in its sole and absolute discretion.
The Guarantor hereby covenants and agrees to deliver to Lender such
financial statements and other financial information regarding the Guarantor as
Lender may from time to time reasonably request.
This Guaranty is a continuing guaranty which shall remain in full
force and effect and shall not be terminable so long as either (i) any
Guaranteed Indebtedness shall remain in force and effect or (ii) Lender shall
have any commitment or obligation to make loans, extend credit or grant other
financial accommodations to Borrower. The dissolution of the Guarantor shall not
effect a termination of this Guaranty.
This Guaranty shall be understood to be for the benefit of Lender and
for such other person or persons as may from time to time become or be the
holder or owner of such other person or persons as may from time to time become
or be the holder or owner of any of the Guaranteed Indebtedness or any interest
therein and this Guaranty shall be transferable to the same extent and with the
same force and effect as any of the Guaranteed Indebtedness may be transferable.
This Guaranty cannot be changed or terminated orally, shall be governed by and
construed in accordance with the substantive laws of the State of Missouri
(without reference to conflict of law principles), shall be binding on the
successors and assigns of the Guarantor and shall inure to the benefit of
Lender's successors and assigns.
THE GUARANTOR HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF ANY MISSOURI STATE COURT OR ANY UNITED STATES OF AMERICA COURT
SITTING IN THE EASTERN DISTRICT OF MISSOURI, EASTER DIVISION, AS LENDER MAY
ELECT,
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<PAGE>
IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY,
(B) AGREES THAT ALL CLAIMS IN RESPECT TO ANY SUCH SUIT, ACTION OR PROCEEDING MAY
BE HELD AND DETERMINED IN ANY OF SUCH COURTS, (C) WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH THE GUARANTOR MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT, (D) WAIVES ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND (E) WAIVES ALL RIGHTS
OF ANY OTHER JURISDICTION WHICH THE GUARANTOR MAY NOW OR HEREAFTER HAVE BY
REASON OF ITS PRESENT OR SUBSEQUENT DOMICILES. THE GUARANTOR (AND BY ITS
ACCEPTANCE HEREOF, LENDER) IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH
RESPECT TO ANY ACTION IN WHICH THE GUARANTOR AND LENDER ARE PARTIES RELATING TO
OR ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY.
Executed as of the 26th day of November, 1997
THE GSI GROUP, INC., Guarantor
/s/ John Funk
By:________________________________
CFO
Title:_______________________________
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<PAGE>
Exhibit 10.3
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and entered into
as of October 10, 1997, by and among The GSI Group, Inc., a Delaware corporation
("GSI"), David Manufacturing Co., an Iowa corporation ("DMC"), David Service
Company, a ____________ corporation ("DSC") (DMC and DSC are individually
referred to as the "Company" and collectively on a joint and several basis as
the "Companies"), and the shareholders of DMC and DSC (the "Shareholders").
GSI, DMC, DSC and the Shareholders are sometimes referred to herein individually
as a "Party" and collectively as the "Parties."
RECITALS
A. The Shareholders own all of the issued and outstanding capital stock
of the Companies (the "Shares") and desire to sell, and GSI desires to acquire,
all of such Shares upon the terms and subject to the conditions set forth in
this Agreement.
1. AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties hereby agree as follows:
2. PURCHASE AND SALE
2.1 Purchase and Sale. Subject to the provisions of this Agreement, GSI
will purchase, and the Shareholders will sell, transfer and assign to GSI, the
number of Shares set forth opposite such Shareholders' names on the signature
page, which Shares constitute 100% of the issued and outstanding shares of
capital stock of the Companies as of the Closing Date, for $7,806.29 per share
(the "Purchase Price").
2.2 Payment. The Purchase Price shall be payable to the Shareholders in
accordance with their share ownership at Closing by certified or bank cashier's
check.
2.4 Closing.
(a) Closing Date. The Closing of the purchase and sale of the Shares
and the other transactions contemplated
<PAGE>
hereby (the "Closing") will take place commencing at 10:00 a.m.
on November 7, 1997, or as soon as practicable thereafter, at the
offices of the Company, unless another time, date or place is
agreed to by the Parties. The date on which the Closing actually
occurs is referred to herein as the "Closing Date".
(b) Closing Deliveries.
(i) At the Closing, the Shareholders and the Companies, as
applicable, will deliver or cause to be delivered to GSI the
following items:
(A) certificates evidencing the Shares, together with an
assignment separate from certificate or duly endorsed
in a form sufficient to effect the transfer thereof to
GSI;
(B) all of the third-party consents and approvals set forth
on Exhibit A hereto, in form and substance satisfactory
to GSI, without payment by or liability to any Company;
(C) for each Company (i) a copy of the director and
shareholder resolutions by which all corporate actions
on the part of such Company necessary to approve this
Agreement were taken, certified by the Secretary of
such Company; (ii) an incumbency certificate signed by
an officer or officers of such Company certifying the
signature and office of each officer executing this
Agreement or any other agreement, certificate or other
instrument executed pursuant hereto; (iii) a copy of
such Company's Certificate or Articles of
Incorporation, as amended to date, certified by the
Secretary of State of Iowa or other appropriate
governmental agency; and (iv) good standing
certificates for such Company, issued as of a recent
date, by the appropriate governmental agency for such
Company's state of incorporation and for each other
jurisdiction, if any, in which such Company is required
to be
2
<PAGE>
qualified to do business as a foreign corporation;
(D) such other certificates, documents and/or instruments
as GSI may reasonably request.
(ii) At the Closing, GSI will deliver or cause to be delivered to
the Shareholders or other appropriate person the following
items:
(A) the Purchase Price
(B) such other certificates, documents and/or instruments
as the Shareholders may reasonably request.
3. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Shareholders. Each Shareholder
hereby severally represents and warrants to GSI that all of the statements
contained in this Section 3.1 are correct and complete with respect to such
Shareholder as of the date of this Agreement, and hereby covenants that all
such statements will be correct and complete with respect to such Shareholder as
of the Closing Date.
(a) Such Shareholder has good and marketable title to the Shares set
forth opposite his name on the signature page hereto, free and clear
of any and all interests, option or rights of any nature.
(b) Such Shareholder has the full right, power and authority to execute
and deliver this Agreement and all other agreements entered into in
connection herewith (the "Related Agreements") by such Shareholder, if
any, and to perform such Shareholder's obligations hereunder and
thereunder. This Agreement and the Related Agreements to which each
Shareholder is a party constitute the valid and legally binding
obligations of such Shareholder enforceable against such Shareholder
in accordance with their respective terms.
(c) Such Shareholder is not a party to, subject to or bound by any
agreement or any judgment, order, writ, prohibition, injunction or
decree of any court or other governmental body which would prevent the
execution or delivery of this Agreement by such Shareholder, or the
sale of the
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<PAGE>
Shareholder's Shares pursuant hereto.
3.2 Representations and Warranties Concerning the Companies. The
Companies and the Shareholders hereby jointly and severally represent and
warrant to GSI that all of the statements contained in this Section 3.2 are
correct and complete as of the date of this Agreement, and hereby covenant that
said statements will be correct and complete as of the Closing Date.
(a) Organization, Qualification and Corporate Power. Each Company is
a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of organization. Each
Company has all requisite corporate power and authority to carry on
the respective businesses in which they are engaged and to own and use
the respective properties owned and used by each of them. True and
correct copies of each Company's Certificate of Incorporation and By-
laws, in each case as amended to date, have been delivered to GSI.
Each Company is qualified to conduct business and is in good standing
under the laws of each jurisdiction wherein the nature of its business
or its ownership of property requires it to be so qualified, except
where the failure to be so qualified, would not individually or in the
aggregate, have a material adverse effect.
(b) Authorization of Transaction. Each Company has all requisite
corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. Without limiting the
generality of the immediately preceding sentence, the Board of
Directors of each Company has duly authorized the execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated hereby by each Company. This Agreement
constitutes the valid and legally binding obligation of each Company
enforceable against it in accordance with its terms.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby will (i) violate or conflict in any way with any applicable
statute, regulation, law, rule, common law doctrine, judgment, order,
decree, stipulation, injunction, charge or other restriction of any
governmental body, governmental agency or court to which any Company
is subject or any provision of the Certificate of Incorporation or By-
laws of any Company or result in the creation of any Security Interest
upon any assets of any Company pursuant to the terms
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<PAGE>
thereof, or (iii) conflict with, result in a breach of, constitute a
default under (with or without notice of lapse of time, or both),
result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, require any notice under, or
result in the creation of any security interest upon any asset of any
Company pursuant to the terms of, any contract, agreement, lease,
sublease, license, sublicense, franchise, permit, indenture agreement
for borrowed money, instrument of indebtedness, security interest or
other arrangement to which any Company is a party or by which any
Company is bound or to which any of its assets are subject. None of
the Companies are required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government, governmental agency or court, or any other Person in order
for the Parties to consummate and the transactions contemplated by
this Agreement and in order that such transactions not constitute a
breach or violation of, or result in a right of termination or
acceleration or any encumbrance on any Company's assets pursuant to
the provisions of, any agreement, arrangement or understanding or any
license, franchise or permit.
(d) Capitalization. Exhibit B sets forth (i) the number of authorized
shares of capital stock of each Company, (ii) the number of issued and
outstanding shares of capital stock of each Company, all of which are
owed by the Shareholders and the names, addresses and social security
numbers of and number of shares held by each Shareholder, and (iii)
all of the current directors and officers of each Company. No Company
has ever authorized, offered, sold or issued capital stock other than
Company Common.
(e) No Subsidiaries. None of the Companies owns or controls any
direct or indirect equity interest or participation in any
corporation, partnership, limited liability company, trust, or other
business association or Subsidiary.
3.3 Representations and Warranties of GSI. GSI hereby represents and
warrants to the Companies and the Shareholders that the statements contained in
this Section 3.3 are correct and complete as of the date of this Agreement and
GSI hereby covenants that said statements will be correct and complete as of the
Closing Date (as though then made and as though the Closing Date were substitute
for the date of this Agreement throughout this Section 3.3).
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<PAGE>
(a) Organization. GSI is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware.
(b) Authorization of Transaction. GSI has all requisite corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Without limiting the generality of the prior
sentence, the Board of Directors of GSI has duly authorized the
execution, delivery and performance of this Agreement by GSI and the
consummation of the transactions contemplated hereby. This Agreement
constitutes the valid and legally binding obligation of GSI,
enforceable it in accordance with its terms.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby will (i) violate or conflict in any way with any statute,
regulation, law, rule or common law doctrine, (ii) violate or conflict
in any way with any judgment, order, decree, stipulation, injunction,
charge or other restriction of any government, governmental agency or
court to which GSI is subject or any provision of its Certificate of
Incorporation or By-Laws, or (iii) conflict with, result in a breach
of, constitute a default under (with or without notice or lapse of
time, or both), result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any
notice under, any contract, agreement, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement for borrowed
money, instrument of indebtedness, Security Interest or other
arrangement to which GSI is a party or by which either of them is
bound or to which any of their respective assets are subject, except
where such violations, conflicts, breaches, defaults or other events
materially delay the consummation of the transactions contemplated
hereby. GSI is not required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government, governmental agency or court, or any other Person in order
for the parties to consummate the transactions contemplated by this
Agreement and in order that such transactions shall not constitute a
breach or violation of, or result in a right of termination or
acceleration or any encumbrance on any of GSI's assets pursuant to the
provisions of, any agreement, arrangement or understanding or any
license, franchise or permit, except for approval,
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<PAGE>
deemed approval or expiration of all applicable waiting periods under
the HSR Act.
4. CONDITIONS
4.1 Conditions to Obligation of GSI. The obligations of GSI to consummate
the transactions contemplated hereby are subject to satisfaction at or prior to
the Closing Date of the following conditions:
(a) The representations and warranties set forth in Sections 3.1 and 3.2
shall be true and correct at and as of the Closing Date;
(b) Each of the Companies and the Shareholders shall have performed and
complied with all of their respective covenants hereunder through the
Closing Date;
(c) Each of the deliveries contemplated by Section 2.4(b)(i) shall have
been made.
(d) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any United
States, state, local or foreign jurisdiction, to which any of the
Parties is a party which would prevent or inhibit the consummation of
the transaction contemplated hereby or seek to impose any liability on
any Party as a result of the consummation of the transactions
contemplated hereby, and all necessary regulatory approvals (including
under the HSR Act) shall have been obtained.
(e) The Shareholder Agreement shall have terminated by a written
instrument satisfactory in form and substance to GSI and its counsel;
(f) GSI shall have obtained financing satisfactory to it in its sole
discretion for the consummation of the transactions contemplated
hereby and GSI shall have completed its due diligence investigation
and been satisfied with the results thereof.
GSI may waive any condition, in whole or in part, specified in this Section 4.1
if it executes a writing so stating at or prior to the Closing Date.
4.2 Conditions to Obligations of the Companies and the
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<PAGE>
Shareholders. The obligations of the Companies and the Shareholders to
consummate the transactions contemplated hereby are subject to satisfaction at
or prior to the Closing Date of the following conditions:
(a) The representations and warranties set forth in Section 3.3 above
shall be true and correct at and as of the Closing Date;
(b) GSI shall have performed and complied with all of its covenants
hereunder through the Closing Date;
(c) Each of the deliveries contemplated by Section 2.4(b) (iii) shall have
been made;
(d) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any United
States, state, local or foreign jurisdiction, to which any of the
Parties is a party which would prevent or inhibit the consummation of
the transaction contemplated hereby or seek to impose any liability on
any Party as a result of the consummation of the transactions
contemplated hereby, and all necessary regulatory approvals (including
under the HSR Act) shall have been obtained.
The Shareholders may waive, in whole or in part, any condition specified in this
Section 4.2 if it executes a writing so stating at or prior to the Closing Date.
5. ADDITIONAL AGREEMENTS
5.1 Pre-Closing Covenants.
(a) Exclusivity. The Companies and the Shareholders agree that they will
not (i) engage in discussions with, or solicit or provide information
to, any third party, other than GSI and its agents, employees,
affiliates and professional advisors with a view to the acquisition by
any third party of either the common stock of either Company or its
business or assets (other than products sold in ordinary course of
business) and (ii) they will not authorize or permit any Affiliate,
officer, employee, representative, advisor or agent to do anything
prohibited by clause (i) above.
(b) Real Property Matters. By the Closing Date, GSI will have
8
<PAGE>
obtained (i) a commitment for an ALTA Form B Owner's Title Insurance
Policy for real property owned by the Companies on the date hereof
(the "Owned Real Property") issued by Chicago Title Insurance Company
or other title insurer or insurers reasonable acceptable to GSI (the
"Title Insurer"), providing for full extended coverage over all
general title exceptions contained in such policies and containing a
waiver of the creditors' rights exception and a 3.1 zoning endorsement
(with parking) (the "Title Commitment"), and (ii) a current survey of
the Owned Real Property prepared by a surveyor licensed by the state
or province in which the Owned Real Property is located and certified
to GSI and the Title Insurer prepared in accordance with the "Minimum
Standard Detailed Requirements for ALTA/ACSM Land Title Surveys" (the
"Survey"), containing such information and detail as are sufficient to
obtain extended title insurance coverage other survey exceptions to
the Title Policy (defined below) and containing a flood zone
certification. At the Closing, the Companies shall execute and deliver
such affidavits of title, ALTA statements broker's affidavits, GAP
undertakings and other similar documents, and take such other action,
as may be necessary to cause the Title Insurer to issue to GSI as of
the Closing Date an owner's title insurance policy pursuant to and in
accordance with the Title Commitment (the "Title Policy") insuring fee
simple title to the Owned Real Property in an amount equal to the fair
market value of such Owned Real Property. The Companies and the
Shareholders shall cooperate with GSI and take all such actions as may
be reasonably necessary to remove any exceptions to title shown in the
Title Commitment and any encroachments or other survey defects shown
in the Survey and to obtain such endorsements to the Title Policy, as
GSI may have reasonably requested prior to the Closing Date. The costs
of issuing the Survey, the Title Policy and all endorsements thereto
required pursuant to this Agreement shall be borne by GSI. In
addition, the Company shall take all actions and execute all documents
necessary to cause the Owned Real Property to be free and clear of all
liens and encumbrances, except those reasonably permitted by GSI.
(c) Conduct of Business. Until the Closing Date, the Companies and the
Shareholders shall use their best efforts to maintain their respective
relationships with and preserve the goodwill of, employees, agents,
distributors, franchisees, licensees, customers, suppliers and others
having business dealings with them.
9
<PAGE>
(d) Pre-Closing Activities. Prior to the Closing Date, the Companies and
the Shareholders shall, with the cooperation of GSI where appropriate,
use their best efforts to obtain any consent, authorization or
approval of, or exemption by, any governmental authority or agency or
other third party, including their landlords and lenders required to
be obtained or made by them in connection with the transactions
contemplated by this Agreement and the Related Agreements.
(e) Investigation. The Companies shall afford to GSI free and full access,
during normal business hours and upon reasonable prior notice, to the
offices, plants, properties, books and records of the Companies in
order that GSI may have full opportunity to make such investigations
of the business, operations, assets, properties and legal and
financial condition of the Companies as GSI deems reasonably necessary
or desirable and the officers of the Companies shall furnish GSI with
such additional financial and operating data and other information
relating to the business operations, assets, properties and legal and
financial condition of the Companies as GSI shall from time to time
reasonably request.
5.2 Waiver and Release. Each Shareholder, on behalf of himself and his
heirs, executors, administrators, successors and assigns (with respect to each
Shareholder, the "Releasing Parties"), irrevocably and unconditionally waives
and releases any and all rights with respect to, and releases, forever acquits
and discharges each and all of the Companies, the Companies' shareholders,
directors, officers, employees, agents and other representatives, and their
respective heirs, executors, administrators, successors and assigns ("Released
Parties") with respect to, each and all claims, demands, charges, complaints,
obligations, causes of action, suits, liabilities, indebtedness, sums of money,
covenants, agreements, instruments, contracts (written or oral, express or
implied), controversies, promises, fees, expenses (including attorneys' fees,
costs and expenses), damages and judgments, at law or in equity, in contract or
tort, in United States, state, foreign or other judicial, administrative,
arbitration or other proceedings, of any nature whatsoever, known or unknown,
suspected or unsuspected, previously, now or hereafter arising, in each case
which arise out of, are based upon or are connected with facts or events
occurring or in existence on or prior to the date of the Closing ("Released
Claims"). Each Shareholder further represents and warrants that he has not
assigned or otherwise transferred any right or interest in or to any of the
Released Claims. This Section
10
<PAGE>
5.3 shall not apply to Claims by Shareholders or Shareholders solely against
another Shareholder (other than GSI) for which neither GSI nor the Company can
have any liability for actions or omissions prior to the Closing Date.
5.3 Indemnification. Subject to Section 5.4(b), each Shareholder shall,
severally and not jointly, indemnify, defend and hold the Acquiring Parties
harmless, from and against the entirety of any adverse consequences GSI may
suffer, sustain or become subject to, up to their pro rata percentage of the
Purchase Price, through and after the date of the claim for indemnification,
resulting from, arising out of, relating to, in the nature of, or caused by any
breach of inaccuracy of any of the representations and warranties set forth in
Section 3.1 of the Agreement made by such Shareholder or any covenants made by
such Shareholder in this Agreement.
6. TERMINATION
6.1 Termination. Notwithstanding anything in this Agreement to the
contrary, this Agreement may be terminated at any time prior to the Closing
Date:
(a) By mutual consent duly authorized by the Board of Directors of GSI,
the Shareholders and the Board of Directors of the Company;
(b) By either GSI or the Company if the Closing has not been consummated
on or before December 31, 1997 (the "Termination Date"), or such later
date as GSI, the Shareholders and the Company may agree to in writing,
except that the right to terminate this Agreement under this Section
6.1(b) shall not be available to any Party whose failure, under this
Agreement, to perform any material obligation or to fulfill any
material obligation within the control of such Party has been the
proximate cause of, or resulted in, the failure of the transactions
referenced herein to be consummated on or before that date;
(c) By GSI, if:
(i) Events occur that render one or more of the conditions to the
obligations of GSI set forth in Section 4.1 impossible of
satisfaction, and such condition or conditions is not waived by
GSI; or
11
<PAGE>
(ii) A material breach by the Companies or the Shareholders of any
representation, warranty, covenant or agreement in this Agreement
occurs and is not cured as soon as reasonably practicable (but in
no event later than thirty (30) days) after written notice
thereof is given to the Company.
(d) By the Companies, if:
(i) Events occur that render one or more of the conditions to the
obligations of the Companies and the Shareholders as set forth in
Section 4.2 impossible of satisfaction, and such condition or
conditions is not waived by the Company and the Shareholders, or
(ii) A material breach by GSI of any representation, warranty,
covenant or agreement in this Agreement occurs and is not cured
as soon as reasonably practicable (but no later than thirty (30)
days) after written notice thereof is given to GSI.
6.2 Notice of Termination. Any Party desiring to terminate this Agreement
pursuant to Section 6.1 shall give prompt written notice of such termination to
the other Parties.
6.3 Default; Remedies. In the event that a Party refuses to consummate the
transactions contemplated by this Agreement or if any default under, or breach
of any representation, warranty or covenant of, this Agreement on the part of a
Party (the "Defaulting Party") (which remains uncured after the cure period set
forth above) shall have occurred that results in the failure to consummate the
transactions contemplated hereby, the non-Defaulting Party shall be entitled to
seek and obtain specific performance pursuant to Section 6.4 or to seek and
obtain money damages from the Defaulting Party plus the non-Defaulting Party's
court costs and reasonable attorneys' fees in connection with the pursuit of its
remedies hereunder. For purposes of this Section 6.3 and Section 6.4, the
Companies and the Shareholders shall collectively on a joint and several basis
be considered one Party.
6.4 Specific Performance. In the event that any Party shall fail or refuse
to consummate the transactions contemplated by this Agreement or if any default
under, or breach of any representation, warranty or covenant of this Agreement
on the party of the Defaulting Party (which remains uncured after the cure
period set forth above) shall have occurred that results in the failure to
consummate the transactions contemplated hereby, then in addition to the other
12
<PAGE>
remedies provided herein, the non-Defaulting Party may seek to obtain an order
of specific performance thereof against the Defaulting Party from a court of
competent jurisdiction. In addition, the non-Defaulting Party shall be entitled
to obtain from the Defaulting Party court costs and reasonable attorneys' fees
incurred by it in enforcing its rights hereunder. As a condition to seeking
specific performance hereunder, GSI shall not be required to have tendered the
Purchase Price but shall be ready, willing and able to do so.
7. MISCELLANEOUS
7.1 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
7.2 Entire Agreement. This Agreement (including the other documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof. Without limiting the generality of the foregoing, this
Agreement supersedes the letter of intent between GSI, the Company and certain
of the Shareholders dated September 15, 1997.
7.3 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign this Agreement or any of such Party's
rights, interests, or obligations hereunder without the prior written approval
of the other Parties, except that GSI may assign their respective rights and
obligations hereunder to any of their Affiliates.
7.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
7.5 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) three (3)
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, (ii) one day after receipt or electronically
confirmed, if sent by fax (provided that a hard copy shall be promptly sent by
first class mail), or (iii) one (1) business day following deposit with a
recognized national overnight courier service for next day delivery, charges
prepaid, and, in each case, addressed to the
13
<PAGE>
intended recipient as set forth below:
If to the Company: With a Copy to:
------------------ ---------------
David Manufacturing Co. Laird, Heiny, McManigal,
1600 12th Street N.E. Winga, Duffy & Stambaugh,
Mason City, Iowa 50401 P.L.C.
FAX:___________________ Norwest Center
Attn:___________________ 10 N. Washington, Suite 300
Mason City, Iowa 50402-1567
FAX: 515-423-5310
Attn: Gerald M. Stambaugh
If to the Shareholders, c/o:
- ----------------------------
David Manufacturing Co.
1600 12th Street N.E.
Mason City, Iowa 50401
FAX:___________________
Attn:___________________
If to GSI:
- ----------
The GSI Group, Inc.
1004 East Illinois Street
Assumption, Illinois 62510
FAX: 217-226-4439
Attn: Craig Sloan, Chief
Executive Officer
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is delivered to the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
7.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois.
14
<PAGE>
7.7 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by GSI,
the Companies and the Shareholders. No waiver of any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent occurrence of
such kind.
7.8 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provision hereof or the
validity or enforceability of the invalid or unenforceable term or provision in
any other situation or in any other jurisdiction.
7.9 Expenses. Except as otherwise explicitly provided in this Agreement,
each of GSI and the Shareholders will bear his or its own direct and indirect
costs and expenses (including fees and expenses of legal counsel, investment
bankers, or other representatives or consultants) incurred in connection with
the negotiation, preparation and execution of this Agreement and the
transactions contemplated hereby, whether or not such transactions are
consummated.
7.10 Counterpart Signature Pages of Shareholders. This instrument is
executed by Shareholders on one or more Counterpart Signature Pages and all
Signature Pages taken together shall constitute a part of same instrument.
IN WITNESS WHEREOF, the Parties hereto have executed this Plan and
Agreement as of the date first above written.
GSI:
THE GSI GROUP, INC.
By: /s/ Craig Sloan
--------------------------------
Name: Craig Sloan
------------------------------
Title: CEO
-----------------------------
15
<PAGE>
THE COMPANIES:
DAVID MANUFACTURING CO.
By: /s/ Wesley J. Cagle
--------------------------------
Name: Wesley J. Cagle
------------------------------
Title: PRES/CEO
-----------------------------
DAVID SERVICE CO.
By: /s/ Wesley J. Cagle
--------------------------------
Name: Wesley J. Cagle
------------------------------
Title: PRES/CEO
-----------------------------
16
<PAGE>
THE SHAREHOLDERS:
- -----------------
/s/ Dale Arnold /s/ Kirk Kraft
- ----------------------------- ----------------------------
Dale Arnold (100 shares) Kirk Kraft (5 shares)
/s/ Tim Miller
- ----------------------------- ----------------------------
Merlin Bartz (1 share) Tim Miller (15 shares)
/s/ Orland Bartz /s/ Gary Pangburn
- ----------------------------- ----------------------------
Orland Bartz (50 shares) Gary Pangburn (10 shares)
/s/ Keith Braun /s/ Jerald Petznick
- ----------------------------- ----------------------------
Keith Braun (485 shares) Jerald Petznick (1 share)
/s/ Randy Brooks /s/ Brian Quam
- ----------------------------- ----------------------------
Randy Brooks (41 shares) Brian Quam (35 shares)
/s/ Donald Brown /s/ Darwin Rader
- ----------------------------- ----------------------------
Donald Brown (3 shares) Darwin Rader (1 share)
/s/ Wesley J. Cagle /s/ Eva Schnabel
- ----------------------------- ----------------------------
Wesley J. Cagle (481 shares) Eva Schnabel (13 shares)
/s/ John Calvert /s/ Scott Shoars
- ----------------------------- ----------------------------
John Calvert (45 shares) Scott Shoars (25 shares)
/s/ Rodney Carlson /s/ Larry Stille
- ----------------------------- ----------------------------
Rodney Carlson (1 share) Larry Stille (100 shares)
/s/ Steven Swartwood
- ----------------------------- ----------------------------
Lynn Ebert (10 shares) Steven Swartwood (10 shares)
/s/ John Egge /s/ Lloyd Vollmers
- ----------------------------- ----------------------------
John Egge (200 shares) Lloyd Vollmers (130 shares)
/s/ Curt Floy /s/ Robert Wilde
- ----------------------------- ----------------------------
Curt Floy (50 shares) Robert Wilde (50 shares)
/s/ Gregory Gardner /s/ Ronald Winters
- ---------------------------- ----------------------------
Gregory Gardner (30 shares) Ronald Winters (10 shares)
/s/ Steve Goche /s/ Stephen A. Wolfe
- ----------------------------- ----------------------------
Steve Goche (20 shares) Stephen A. Wolfe (486 shares)
/s/ Ronald Hawkins /s/ David M. Murphy
- ----------------------------- ----------------------------
Ronald Hawkins (50 shares) David M. Murphy (7 shares)
17
<PAGE>
Exhibit 10.4
LEASE
-----
THIS AGREEMENT, made effective this 29th day of April, 1997, between
RICHARD PERRY and PRISCILLA PERRY, husband and wife, RICHARD PERRY, JR. and
SHARON LYNN PERRY, husband and wife, (collectively the "Landlord"), and THE GSI
GROUP, INC. (the "Tenant"),
WITNESSETH:
In consideration of the covenants contained herein the parties hereto agree
as follows:
1. Description of Premises. The Landlord hereby leases to the Tenant the
building and real estate commonly known as 1015 West Ninth Street, Mt. Carmel,
Illinois, legally described as follows:
Part of the Southwest 1/4 of Section 20, Township 1 South, Range 12
West, Second Principal Meridian, Wabash County, described as follows:
Commencing as a point of beginning at an iron pin at the Northwest
Corner of the Western Services Tract as shown on a plat recorded in
Plat Book 2, Page 69; thence South 22 degrees 01 minutes East a
distance of 824.70 feet to an iron pin on the North right-of-way line
of the Southern Railroad; thence South 80 degrees 35 minutes West
along said North right-of-way line a distance of 399.3 feet to an iron
pin; thence North 22 degrees 01 minutes West a distance of 739.64 feet
to an iron pin on the South right-of-way line of SBI Route 15; thence
North 68 degrees 17 minutes East a distance of 390 feet to the point
of beginning, containing 7.00 acres.
(hereinafter referred to as the "Premises").
2. Term. The term of this lease shall be one (1) year, beginning on the
effective date of this lease, and terminating on March 31, 1998. The Lease shall
automatically renew for two periods of one (1) year each, unless Tenant gives 30
days written notice of its intention to
<PAGE>
-2-
terminate. The Lease shall terminate upon purchase of the Premises by Tenant
pursuant to paragraph 19.
3. Rental. The Tenant shall pay a total rental of Fifty-Seven Thousand Six
Hundred Dollars ($57,600.00) for the initial one (1) year term, payable in equal
monthly installments of Four Thousand Eight Hundred Dollars ($4,800.00) each, in
advance, to Richard Perry on the first day of each month commencing on April 1,
1997, which is the effective date of this lease.
4. Renewal Term Rent. During each extended term, the basic rent shall be
Sixty Three Thousand Three Hundred and Sixty Dollars ($63,360.00) or Five
Thousand Two Hundred Eighty Dollars ($5,280.00) per month for each one (1) year
extended term.
5. General Taxes. The Landlord shall pay all general real estate taxes on
the Premises and shall, upon request by Tenant, furnish Tenant with paid
receipts, cancelled checks or other proof of payment satisfactory to Tenant.
Tenant shall reimburse Landlord for the amount of real estate tax paid in excess
of those paid for the tax year 1995, which reimbursement will be paid with the
October rent of each year starting October, 1998.
6. Insurance. The Landlord shall keep the Premises insured throughout the
term and any extended term of this lease, protecting both the Landlord and the
Tenant against loss or damages by fire, lightning, earthquake, windstorm or
other casualty ordinarily covered by extended coverage in an amount not less
than $565,000.00, and claims for personal injury and property damage under a
policy of general public liability insurance with limits as may be reasonably
requested by the Tenant from time to time, but not less than $1,000,000 per
person and $3,000,000 per occurrence, in a company or companies acceptable to
the Tenant. The Landlord shall deliver to the Tenant a certificate of insurance
showing compliance with this
<PAGE>
-3-
provision and naming Tenant as an additional insured. Tenant shall maintain a
policy of general public liability insurance with limits not less than
$1,000,000 per person and $3,000,000 per occurrence, in a company or companies
acceptable to Landlord. The Tenant shall also maintain property insurance on its
property located on the Premises. The Tenant shall deliver to the Landlord a
certificate of insurance showing compliance with this provision and naming
Landlord as an additional insured.
7. Use. The Tenant shall have the right to use the Premises for any lawful
business, including, without limitation, a light manufacturing location;
provided, however, the Tenant agrees that it will not sell or permit the sale of
any alcoholic beverages in the Premises.
8. Quiet Enjoyment. The Tenant, upon paying the basic rent and all
additional rent and other charges herein provided for, and performing all of the
other terms of this lease, shall quietly have and enjoy the Premises during the
term of this lease without hindrance or molestation by anyone claiming by or
through the Landlord, subject, however, to the reservations and conditions of
this lease.
9. Maintenance, Repair, Janitor Service and Other Expenses. The Tenant
shall, at its own expense, make all necessary repairs and replacements to the
Premises and to the pipes, heating and air conditioning systems, alarm system,
plumbing system, window glass, fixtures, and all other appliances and
appurtenances belonging thereto, and all equipment used in connection with the
Premises, except the roof which shall be repaired at Landlord's expense. All
repairs shall be promptly made with materials of like quality to the original
work. On default of the Tenant in making needed repairs, the Landlord may, but
shall not be required to, make such repairs for the Tenant's account and the
expense thereof shall constitute and be
<PAGE>
-4-
collectible as additional rent. The Tenant shall provide janitor service for the
Premises and Tenant shall also pay for the removal of certain interior walls if
Tenant removes them.
10. Surrender of Premises. At the expiration of the lease term, the
Tenant shall surrender the Premises in as good condition as it was in at the
beginning of the term, reasonable use and wear and damage by fire or other
casualty without the fault or negligence of Tenant excepted.
11. Improvements by Tenant. No alterations, additions, or improvements to
the Premises shall be made by the Tenant without the written consent of the
Landlord, which consent shall not be unreasonably withheld or delayed. Any
alteration, addition, or improvement made by the Tenant after such consent shall
have been given, shall be done so without causing a lien to be attached to the
Premises and, at the Landlord's option, become the property of the Landlord upon
the expiration or other sooner termination of this lease; provided, however,
that the Landlord shall have the right to require the Tenant to remove such
fixtures at the Tenant's expense upon such termination of this lease.
12. Landlord's Representations and Warranties. Landlord represents and
warrants that: the Premises are in good order and repair, provided that the
Tenant shall accept the electrical, heating, plumbing and air conditioning
systems in their present condition without representation or warranty; the
Premises are not subject to any zoning or other governmental use restrictions;
Landlord is the owner of the Premises and that the Premises are free and clear
of all mortgages, liens and encumbrances except the lien of real estate taxes
not yet due and payable and easements of record and a mortgage in favor of
Security Bank & Trust of Mt. Carmel, Illinois; to the best of Landlord's
knowledge, neither Landlord nor any predecessor in
<PAGE>
-5-
interest to Landlord has released or deposited upon the Premises any Hazardous
Materials (as defined elsewhere in this section); to the best of Landlord's
knowledge, neither Landlord nor any predecessor in interest to Landlord has
received notice of the existence or alleged existence of any Hazardous Materials
upon or under the Premises from any governmental agency or other party; and
there is one underground fuel oil tank on the Premises.
Hazardous Materials, as used herein, shall include, without limitation,
petroleum and petroleum products, those substances defined as hazardous
substances in the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended ("CERCLA"), and those wastes defined as
hazardous wastes under the Resource Conservation and Recovery Act, as amended
("RCRA"), and any other substance identified as being hazardous, toxic or
dangerous under any local, Illinois or federal environmental law or regulation.
13. Utilities and Other Services. The Tenant shall pay all expense of
heat, air conditioning, electricity, water and all other services furnished the
Premises throughout the lease term.
14. Access. The Landlord shall have full and unrestricted access to the
Premises for any reasonable purpose during normal business hours throughout the
lease term.
15. Fire or Other Casualty Loss. In case of damage by fire or other
casualty to the Premises, without fault or negligence of the Tenant, if the
damage is so extensive as to amount practically to the total destruction of the
Premises, this lease shall terminate, and the rent shall be apportioned to the
time of the damage. In all other cases where the Premises is damaged by fire or
other casualty without the fault or negligence of the Tenant, the Landlord shall
repair the
<PAGE>
-6-
damage with reasonable dispatch, and if the damage has rendered the Premises
untenantable, in whole or in part, there shall be an apportionment of the rent
until the damage has been repaired.
16. Condemnation. If the Premises or any part thereof is taken by eminent
domain, or conveyed upon threat of such proceedings, this lease shall expire on
the date when the Premises shall be so taken or conveyed, and the rent shall be
apportioned as of that date. No part of any award shall belong to the Tenant
other than that portion attributable to leasehold improvements made by Tenant
and that portion attributable to cost of or removal of Tenant's stock, equipment
and fixtures.
17. Sign. Tenant shall be allowed to place signs identifying the Premises
in windows of the Premises or on or attached to the building.
18. Assignment of Lease. Neither party shall assign this lease or sublet
the Premises without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed.
19. Indemnification. Tenant shall indemnify the Landlord against any
accident, injury, death or damage to any person or property which shall happen
in or about the Premises during the term of the Lease, unless due to an act or
omission of Landlord.
20. Option to Purchase. Tenant shall have the option to purchase the
Premises for Four Hundred Eighty Thousand Dollars ($480,000.00) at any time
during the initial term or extended term of this Lease, and, if such option is
exercised in the first two years, such purchase price shall be reduced by 1/3 of
all first year lease payments and 1/4 of all second year lease payments made by
Buyer under this Lease. To exercise its option, Tenant shall execute and deliver
the Real Estate Purchase Agreement, a copy of which is attached hereto.
<PAGE>
-7-
21. Notice. Any notice under this lease must be in writing and must be
delivered personally or sent by first class mail to the last address of the
party to whom the notice is to be given as designated by such party in writing.
The Landlord and Tenant hereby designate their address as follows:
LANDLORD: Richard Perry
P.O. Box 611
Mt. Carmel, Illinois 62863
TENANT: The GSI Group, Inc.
1004 East Illinois Street
Assumption, Illinois 62510
ATTENTION: Craig Sloan
22. Binding Effect of Lease. This lease shall be binding upon the heirs,
executors, administrators, successors and assigns of the respective parties
hereto.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals the
day and year first above written.
LANDLORD:
/s/ RICHARD PERRY
---------------------------
RICHARD PERRY
/s/ PRISCILLA PERRY
---------------------------
PRISCILLA PERRY
/s/ RICHARD PERRY, JR.
---------------------------
RICHARD PERRY, JR.
/s/ SHARON LYNN PERRY
---------------------------
SHARON LYNN PERRY
TENANT: THE GSI GROUP, INC.
By: /s/ JOHN C. SLOAN
---------------------------
Its Chief Executive Officer
<PAGE>
Exhibit 10.5
LEASE WITH OPTION TO PURCHASE
-----------------------------
This Lease with Option to Purchase entered into in Paris, Illinois, this
12th day of July, 1996, by and between Edgar County Bank & Trust Company as
Trustee for Trust No. 455-232, under Trust Agreement dated August 24, 1988 and
Chris Patrick of Paris, Illinois, the beneficiary of such trust (Trustee and Mr.
Patrick are hereinafter collectively referred to as the "Lessor"), and The GSI
Group, Inc., a Delaware corporation, of Assumption, Illinois ("Lessee").
1. Lessor hereby leases to the Lessee, and the Lessee hereby leases from
the Lessor, approximately 6 acres located approximately five (5) miles north of
Paris, Illinois at Rural Route 6, Box 175 together with the existing building
and improvements located thereon, containing approximately 36,000 square feet,
and all other appurtenances, rights, privileges and easements thereto belonging
and, hereinafter referred to as the "premises". A legal description of the
premises is attached hereto as Exhibit A.
2. The initial term of this Lease is twelve (12) months, commencing on
the date hereof. Lessee shall have the option to extend the term of this Lease
for up to an additional twelve (12) months after the expiration of the initial
term by providing Lessor with written notice of its intent to exercise such
option at least thirty (30) days prior to expiration of the initial term. Upon
expiration or earlier termination of this Lease, unless Lessee has exercised its
purchase option, Lessee will surrender the premises in as good order and
condition as when received, reasonable wear and tear, alterations permitted by
Lessor, damage from the elements, fire, acts of God, or other casualty excepted.
3. Lessee agrees to use and occupy the premises for the purpose of
storing property related to its business and conducting a manufacturing
business, or any other uses associated therewith. Lessee shall not, at any
time, use the premises for manufacturing, storing or selling intoxicating liquor
(including, without limitation, beer and wine). Lessee agrees to keep the
premises in a clean and orderly condition and to arrange and pay for the
removal, on a regular basis, of all trash, garbage, and similar items generated
by Lessee.
<PAGE>
4. Lessee agrees to pay to Lessor as rent for the premises the sum of Two
Thousand, Five Hundred Dollars ($2,500.00) per month, payable in advance on the
lst day of each and every month of the term, the first such payment being due on
the date of the commencement of the Lease under paragraph 2, and each succeeding
payment to be made on or before the first day of each succeeding calendar month.
Rent for any part of a calendar month shall be prorated in the proportion which
the number of days Lessee has possession of the premises in such month bears to
the total number of days in said month. Each late installment of rent shall
bear interest at the rate of twelve percent (12%) per year from the date due
until paid if not actually received by Lessor within five (5) days of the due
date.
5. Lessee agrees to pay as additional rent hereunder:
a. Real estate taxes and assessments, ordinary and extraordinary,
general and specific, which may be levied or assessed on, or with
respect to, the premises, prorated for the term of this Lease.
Lessee's portion of these taxes shall be paid to Lessor on or
before the due date or the due date of the last rent payment,
whichever first occurs, or if the Lease is earlier terminated
without breach by Lessee and without exercise of Lessee's
purchase option, the Lessee's tax obligation shall be calculated
to the date of, and be paid on, such termination;
b. All fuel, power, water, electricity, and any other utilities over
the term of the Lease;
c. Maintenance and repair of the interior of the buildings and all
mechanical, electrical and compressed air systems and equipment
maintenance (including, without limitation, all heating and
ventilating equipment and plumbing), glass and fixtures; and
d. The cost of any improvements or modifications to the premises
made by Lessee as provided by paragraph 12.
6. All expenses of maintenance of the structure and the exterior of the
buildings and improvements located on the premises, including all glass in
exterior doors and windows, shall be paid by the Lessee; provided that Lessor
will pay for the repair of all major roof problems. Any damage to the building
on the premises caused by Lessee shall be repaired and paid for by Lessee. Any
structural condition requiring repair that is not covered by the insurance
required to be provided by Lessee pursuant to paragraph 8 shall be paid for by
Lessor unless such condition is caused by Lessee and provided neither
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Lessee nor Lessor shall be required to replace the roof. If any such structural
condition is reasonably estimated to cost more than $50,000 to repair and Lessor
determines that it is not in its interest to undertake such repairs, either
party hereto will have the option for a period of thirty (30) days after Lessor
communicates such determination to Lessee to terminate this Lease.
7. Lessor represents and warrants that:
a. the premises are in good order and repair;
b. the premises are not subject to any zoning or other governmental
use restrictions;
c. it is the owner of the premises and that the premises are free
and clear of all mortgages, liens and encumbrances except the
lien of real estate taxes not yet due and payable, easements of
record and a collateral assignment of beneficial interest in the
aforementioned trust;
d. neither Lessor nor, to the best of Lessor's knowledge, any
predecessor in interest to Lessor has released or deposited upon
the premises any hazardous materials except as may be disclosed
in the Phase II Environmental Assessment dated May 3, 1996 by
Andrews Environmental Engineering Inc. (the "Audit");
e. neither Lessor nor, to the best of Lessor's knowledge, any
predecessor in interest to Lessor, has received notice of the
existence or alleged existence of any hazardous materials upon or
under the premises from any governmental agency or other party
except as disclosed in the Audit; and
f. there are no underground storage tanks on the premises.
As used in this Lease, the term "hazardous materials" shall include, but not be
limited to, substances defined as "hazardous substances", "hazardous materials"
or "toxic substances" in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Sec. 9601, et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. 1801 et seq.; the Resources
Conservation and Recovery Act, 42 U.S.C. Sec. 6901 et seq.; the Toxic Substances
Control Act, 15 U.S.C. Sec. 2601 et seq.; the Clean Air Act, 42 U.S.C. Sec. 7401
et seq.; and the Clean Water Act, 33 U.S.C. Sec. 1251 et seq. (collectively, the
"Environmental Laws"), but, for purposes of this paragraph, only if such
substances, if found on the premises, are in violation of any such act or a
governmental rule or regulation.
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Lessor covenants and warrants that Lessee, if not in default, shall
peacefully and quietly hold and enjoy the premises during the term hereof.
Lessor agrees not to allow any liens or encumbrances having priority over the
Lease to be placed upon the premises during the term hereof and to promptly
cause any such lien to be removed should it exist in the future.
Notwithstanding any other provision contained herein, Lessor covenants and
agrees that it shall be obligated to remediate the groundwater contamination
disclosed in the Audit (the "Pre-Exiting Condition") by July 11, 1997; provided,
however, that if Lessor determines that the cost of such remediation (based upon
a reasonable contractor's estimate) will exceed $30,000, Lessor will deliver a
copy of such estimate to Lessee and, if such estimate is satisfactory to Lessee,
either party hereto will have the right for a period of thirty (30) days to
terminate this Lease. If such estimate is unsatisfactory to Lessee, Lessee will
have the right to obtain its own estimate and the average of the two will be
deemed to be the cost of remediation for the purposes of the immediately
preceding sentence. If Lessor fails to remediate the Pre-Existing Condition by
July 11, 1997, Lessor shall be deemed to have breached such covenant and Lessee
shall have the right to take the actions provided under either paragraph 15(a)
or 15(b) immediately. Lessor shall indemnify and hold harmless Lessee from any
liability, cost or expense of any nature whatsoever relating to, resulting from
or arising out of the Pre-Existing Condition or the remediation thereof. For
purposes of this Lease, the remediation of the Pre-Existing Condition shall be
considered complete when, after full disclosure and investigation, the Illinois
Environmental Protection Agency issues a "No Further Remediation" letter to
Lessor specifically addressing the Pre-Existing Condition.
8. During the term of this Lease and all extensions thereof, Lessee will
keep the premises insured by a responsible insurance company or companies
licensed in Illinois against loss or damage by fire, lightning, tornado,
earthquake, windstorm and other casualty ordinarily covered by extended coverage
in an amount not less than $1 million. Within thirty (30) days after the date
hereof, Lessee shall provide Lessor with a certificate evidencing such
insurance, naming Lessor as an additional insured.
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9. Lessor shall not be liable to Lessee or any other person for injury or
death to persons or damage to property on the premises from Lessee's failure to
keep the premises in repair or from the act, omission, or negligence of any
person other than Lessor, its employees, agents and invitees. Lessee will
indemnify Lessor for, and hold Lessor harmless from, all claims for injury or
death to persons or damage of any kind to property arising out of Lessee's use
or occupancy of the premises.
10. Lessee will permit Lessor and its agents to enter on the premises or
any part thereof, with 48 hours written notice during normal business hours,
for the purpose of examining the same or making such repairs or alterations as
may be necessary for the safety or preservation thereof.
11. Lessee agrees not to assign this Lease nor sublet the premises or any
portion thereof without the prior written consent of the Lessor, which consent
shall not be unreasonably withheld. An acceptance of a permitted assignment of
this Lease, or sublease of the premises, by any person shall be construed as a
promise on the part of such assignee or sublessor to be bound by and perform all
of the agreements of Lessee herein contained.
12. Lessee may make non-structural alternations, additions, or
improvements to the premises, including without limitation, erection or
installation of signs, as Lessee deems necessary for its purposes. Unless the
parties hereto agree otherwise in writing, prior to the termination of this
Lease all such non-structural alterations, additions or improvements shall be
removed and the premises restored to its original condition by Lessee at its
expense or, at Lessor's election, remain in place and become the property of
Lessor.
13. Lessee agrees not to make any contract for the construction,
alteration, addition, repair, or improvement of, or to, the premises, or any
part thereof, without providing in such contract that no lien of mechanics or
materialmen shall be created or shall arise against the premises, building, or
improvements at any time located on said premises. All persons furnishing any
work, labor or materials for the Lessee, as well as other persons whatsoever,
are hereby given notice that no mechanics lien, materialmen's lien, or any
other encumbrance made by or obtained against the Lessee, or its interest in
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said premises, buildings, or other improvements on said premises, shall in any
manner or degree affect the title or interest of the Lessor in the premises,
buildings, or other improvements thereon.
14. Lessee agrees to comply with all present and future statutes, laws,
ordinances, enactments, rules, regulations, orders, decrees, directives,
mandates or other similar requirements of any federal, state or local
government, court of public authority prohibiting, regulating or otherwise
relating to environmental pollution and environmental control of any kind,
including, but not limited to, air pollution, water pollution, noise pollution,
solid waste pollution and toxic substance control ("Environmental
Requirements"), including, but not limited to, Environmental Requirements under
the Environmental Laws, which are applicable to or arise out of or in connection
with Lessee's use or occupancy of the premises. Lessee further agrees to comply
with such Environmental Requirements at its sole cost and expense and will hold
harmless, indemnify and defend Lessor from and against any claims, suits,
damages, losses, costs and expenses, including reasonable attorneys' fees, made
against or sustained by Lessor as a result of Lessee's failure to comply with
any Environmental Requirements.
Lessee will comply with all existing and future federal, state, county and
local statutes, laws, enactments, ordinances, rules, regulations, orders and
other governmental requirements ("Governmental Requirements") applicable to
Lessee's use or occupancy of the premises, including, but not limited to,
workmen's compensation laws and the Occupational Safety and Health Act of 1970
and all governmental Requirements issued thereunder, and hold harmless,
indemnify and defend Lessor from and against any claims, actions, damages,
losses, costs and expenses, including reasonable attorneys' fees, made against
or sustained by Lessor as a result of Lessee's failure to comply with the
Governmental Requirements.
15. This Lease may, at Lessor's election, be terminated by Lessor in the
event of a breach by Lessee of any of its material agreements herein contained,
unless Lessee cures such breach within thirty (30) days of the date of receipt
by Lessee of notice thereof from Lessor, except as otherwise provided by
paragraph 16 and except that any default in payment of rent must be cured within
five (5) days of the date of receipt of such notice.
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If Lessor defaults in any of its covenants and agreements herein contained,
if any of the representations and warranties made by Lessor herein were untrue
when made or if, at any time during the term hereof, Lessee determines, by
whatever means, that the premises contain a hazardous material in violation of
an environmental law or regulation not introduced by or through Lessee or its
suppliers or contractors (other than the "Pre-Existing Condition"), Lessee may
elect either of the following if after not less than thirty (30) days prior
written notice to Lessor, Lessor has not cured the default or, within such time,
commenced and diligently pursued the cure of such default:
a. Lessee may remedy such default by any reasonably necessary
action, and in connection with such remedy may pay expenses and
employ counsel. All reasonable sums expended or obligations
incurred by Lessee in connection therewith, including, but not
limited to, reasonable attorneys' fees, shall be paid by Lessor
to Lessee on demand, and on failure of such reimbursement, Lessee
may, in addition to any other right or remedy that Lessee may
have, deduct the costs and expenses thereof from rent or other
payments subsequently becoming due hereunder; and
b. if the Lessor's default is material, elect to terminate this
Lease on at least thirty (30) days prior written notice to
Lessor thereby terminating this Lease on the date designated in
such notice;
provided, however, that if the default involves an environmental violation (i)
not caused by or through Lessee or by its suppliers or contractors, (ii)
separate and distinct from any condition or event arising out of or relating to
the Pre-Existing Condition and (iii) which a mutually agreeable contractor
reasonably expects would exceed $20,000 to cure, subparagraph a shall not
apply, and Lessor may, without any liability to Lessee, elect to terminate this
Lease without making any effort to cure. The foregoing notwithstanding, Lessor
will indemnify Lessee for and hold it harmless from any environmental liability
and reimburse Lessee for cost associated with such indemnification, including,
but not limited to, reasonable attorneys' fees, for conditions on the premises
prior to commencement of this Lease, including but not limited to the Pre-
Existing Condition.
16. Lessor may, at its option, and without releasing Lessee from any
liability hereunder, terminate this Lease:
a. if any violation of an environmental law, rule or regulation
caused by or through Lessee, or its suppliers and contractors
occurs and is not fully remedied within thirty (30) days after
the Lessee first has knowledge thereof, or, if the violation
cannot be remediated within thirty (30) days with reasonable
diligence, if Lessee has not begun
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appropriate remediation within such thirty (30) day period and
thereafter diligently pursued the necessary corrective measures
to completion; or
b. if a petition in bankruptcy shall be filed by or against Lessee,
or if Lessee shall file a petition seeking to reorganize or be
adjudged bankrupt or insolvent by any court, or if a receiver or
trustee shall be appointed in any suit or proceedings brought by
or against Lessee, or if an attachment or execution shall be
issued and levied against property of the Lessee, and the same
shall not be fully released within thirty (30) days.
17. If Lessee shall abandon or vacate the premises prior to the
termination of this Lease, Lessor may, but shall not be obligated to, relet the
premises for such rent and on such terms as Lessor may see fit; and, if a
sufficient sum shall not be thus realized, after paying all expenses, including,
but not limited to, reasonable attorney's fees and costs, of such reletting, to
satisfy the rent hereby reserved and all other sums Lessee is required to pay
under this Lease, Lessee agrees to satisfy and pay all deficiencies.
18. A waiver by Lessor of any one instance of default by Lessee in the
performance of any provision of this Lease shall not be construed as a waiver of
any prior or subsequent default of the same or any of the terms of this Lease,
nor a relinquishment by Lessor of Lessor's right hereunder to have Lessee
perform this Lease in strict accordance with its provisions, time being of the
essence of this Lease.
19. The rights and remedies of Lessor under this Lease are not exclusive,
but shall be cumulative, and the exercise of any right or remedy by Lessor shall
not prevent the exercise of any other right or remedy by Lessor, whether
provided for by this Lease or by law or equity. If Lessee fails to perform by
obligation under this Lease, Lessor may, but shall not be required to, perform
same and any expense incurred by Lessor in so doing shall become immediately due
and payable by Lessee as additional rent and shall bear interest at the rate of
twelve percent (12%) per year from the date paid by Lessor until repaid by
Lessee.
20. In the event any material portion of the premises hereby leased is
condemned under the power of eminent domain during the term of this Lease which
substantially impairs Lessee's intended use of the premises, this Lease may be
terminated at the election of either Lessor or Lessee upon not less than thirty
(30) days prior written
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notice of such election. The sums paid as compensation for such condemnation
shall be paid to Lessor, except that any part of such sum paid as compensation
for loss of Lessee's business and cost of Lessee's removal of stock and fixtures
shall belong to Lessee. The foregoing notwithstanding, if Lessee exercises its
purchase option, all condemnation compensation shall be paid to Lessee upon
completion of the purchase of the premises by Lessee.
21. All of Lessee's office equipment, personal property, manufacturing
equipment, removable improvements and fixtures erected in or attached to the
premises by the Lessee may be removed by the Lessee upon termination of this
Lease.
22. Notices of any kind by either the Lessor or the Lessee to the other
shall be written, dated, and signed by or on behalf of the party giving the
same. Notice may be sent by certified or registered United States mail,
delivery restricted to addressee, postage prepaid, return receipt requested, by
hand delivery, or by a nationally recognized courier service, delivery
restricted to addressee, to Lessor and Lessee at the following addresses, unless
written notice is received by either party changing such address:
To Lessor: Mr. Chris Patrick
Patrick Construction Co.
P.O. Box 547
Paris, IL 61944
With a copy to:
Richard L. James
408 W. Jasper
P.O. Box 820
Paris, IL 61944
To Lessee: Mr. Craig Sloan, CEO
The GSI Group, Inc.
1004 East Illinois
P.O. Box 20
Assumption, IL 62510
With a copy to:
Mr. John W. Funk
Executive Vice President/General Counsel
The GSI Group, Inc.
1004 East Illinois
P.O. Box 20
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Assumption, IL 62510-0029
Any notice given pursuant to, and in accordance with, this paragraph shall
be considered complete on the date of mailing, hand delivery, or placement with
the courier.
23. All of the agreements, conditions and undertakings herein contained
shall extend to and be binding on the representatives and permitted successors
and assigns of the respective parties hereto.
24. Notwithstanding the agreements herein contained, it is expressly
understood that no partnership or joint venture is created hereby, nor shall
Lessor be considered or held out to be Lessee's agent, the relationship created
by this Lease being solely that of landlord and tenant.
25. This Lease contains the entire agreement of the parties and, except as
contained herein, no representations, warranties or agreements have been made by
either party, or their agents or representatives, to or with the other. This
Lease shall be executed in duplicate, each such executed copy to be considered
an original.
26. Lessee agrees at the expiration or earlier termination of this Lease
to give peaceful possession of the premises to Lessor.
27. Damages to buildings and improvements located on the premises caused
by Lessee, its agents or employees, or an invitee of Lessee shall be promptly
repaired by Lessee at Lessee's cost and there shall be no abatement or
termination of rent because of such damage. Lessee shall be entitled to apply
the proceeds of insurance provided by Lessee to pay for such repairs. In lieu
of such repairs, Lessee may promptly exercise its purchase option under
paragraph 28, without any decrease in the purchase price because of such damage.
In such case, the damage shall be deemed to have occurred after the notice of
exercise for purposes of applying the insurance provisions of paragraph 28(f).
In case of damage to the buildings and improvements on the premises which
Lessee is not required to repair under any provision of this Lease, Lessor may,
if such damage costs more than Fifty Thousand Dollars ($50,000.00) to repair
(based on reliable contractor's estimate), at its option, repair such damage
with reasonable promptness after Lessor is notified of such damage. If Lessor
elects to repair the premises, it must give Lessee notice within 30 days of the
date of casualty of such election
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and it shall be required to repair Lessee's additions, improvements and
alterations, if any. The proceeds of insurance which Lessee is required to
provide under paragraph 8 shall be paid to Lessor to the extent of such damage
except that any proceeds payable under Lessee's insurance for damage to Lessee's
inventory, equipment and other personal property and improvements, additions and
alterations made by Lessee which Lessor does not repair shall be paid to Lessee.
In the event Lessor, in its sole discretion, determines not to repair such
damage, either the Lessee or the Lessor may terminate this Lease within 30 days
of the date of casualty by written notice without liability to the other except
for performance of the parties' respective obligations hereunder through the
date of such termination; provided, however, that if Lessee elects to exercise
the option to purchase as specified in paragraph 28 (without any reduction in
the purchase price because of such damage), Lessor shall assign to Lessee the
rights in insurance proceeds received by reason of such casualty from insurance
provided by Lessee under this Lease.
28. As further consideration for the Lessee's agreements hereunder, Lessor
gives the option to Lessee to purchase the premises for the sum of Two Hundred
Seventy Five Thousand Dollars ($275,000.00) and the approximately 20 acres
adjacent to the west boundary line of the premises and owned by Lessor, the
legal description of which is set forth on Exhibit B hereto (the "Farmland"),
subject to the following:
a. This option shall be exercisable by Lessee giving written notice to
Lessor of its exercise at least thirty (30) days prior to the
expiration date of the Lease. The option may be exercised for just
the premises or for the premises and the Farmland but not for just the
Farmland.
b. The Lease shall continue in effect until the sale is closed. All
obligations of Lessee through the date of closing of the sale must be
performed at or before closing.
c. Within 30 days of Lessor's receipt of Lessee's notice, Lessor shall
furnish, at its expense, a commitment for an Owner's Title Insurance
Policy for the full sale price, showing good and merchantable title to
the premises and/or the Farmland in Lessor subject to the standard
exceptions contained in such policy. Lessee shall have thirty (30)
days after Lessee's receipt of such evidence of title to submit any
objections to title to Lessor. Any such objection must be submitted
in writing, and any objections which are not timely submitted shall be
deemed waived. Lessor shall have a reasonable time to cure the same
at Lessor's expense; provided, however,
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that Lessee may elect to take such title with a reasonable reduction
of the purchase price if Lessor is unable to cure the same by the
closing date.
d. Closing shall occur at Lessor's office at Paris, Illinois, or such
other place as the parties may agree, forty-five (45) days after the
date of Lessee's receipt of the aforementioned title insurance policy.
e. Payment of the purchase price for the premises shall be paid in cash
at closing, subject to Lessor delivering to Lessee a trustee's deed
for the premises in form and content satisfactory to Lessee. Lessor
shall agree in writing at the time of the closing of either the
premises or the Farmland to indemnify and hold harmless Lessee from
any liability, and to reimburse Lessee for any costs or expenses
incurred by Lessee, arising out of, related to or in connection with
any environmental condition existing on, under or in the premises on
the date hereof, including, but not limited to, the Pre-Existing
Condition.
f. If Lessee purchases the premises but does not purchase the Farmland at
the same time, Lessee shall have a nonexclusive option, along with a
right of first refusal, to purchase the Farmland until July 12, 2006.
Under the right of first refusal, Lessee shall have thirty (30) days
to purchase the Farmland after receipt of notice from Lessor that
Lessor has received a bona fide written offer to buy the Farmland from
an unrelated third party (the "Offer"). Such notice shall be
accompanied by a copy of the Offer. Lessee's right to purchase shall
be for the same purchase price and other terms and conditions as are
contained in the Offer. If Lessee declines to purchase the Farmland
during such 30 day period, Lessor shall be free to sell the Farmland
to such offeror on terms and conditions identical to those provided to
Lessee.
g. Unless the terms of the Offer provide otherwise, the payment for the
Farmland shall be effected by delivering to Lessor a warranty deed
transferring from Lessee to Lessor title to farmland in Edgar County
(the "Traded Farmland"), subject to Lessor delivering to Lessee a
trustee's deed for the Farmland, both of which deeds shall be in form
and content satisfactory to the recipient thereof. The Traded Farmland
shall have an appraised value equal to the appraised value of the
Farmland and shall be selected by Lessor within __ days prior to the
date of the closing. The appraisal of both parcels of farmland shall
be performed by a mutually agreeable appraiser, the cost of which
shall be shared equally by both parties.
29. This Lease is executed by The Edgar County Bank & Trust Co., not
personally, but as Trustee as aforesaid, in the exercise of the power and
authority
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conferred upon and vested in it as such Trustee. It is expressly understood and
agreed by the Lessee herein and by every person now or hereafter claiming any
right or security hereunder that nothing contained herein by this Lease shall be
construed as creating any liability on the part of The Edgar County Bank & Trust
Co., all such liability, if any, being expressly waived.
IN WITNESS WHEREOF, the parties hereto have signed this Lease in duplicate
at Paris, Illinois, the day and year first above written.
Edgar County Bank & Trust Company The GSI Group, Inc.
as Trustee for Trust No. 455-232
under Trust Agreement dated
August 24, 1988
By: /s/ David F. Sullivan By: /s/ John C. Sloan
------------------------------ ------------------------------
Its: Vice President Its: Chief Executive Officer
/s/ Chris Patrick
----------------------------------
Chris Patrick
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Exhibit 10.7
AGREEMENT
THIS AGREEMENT is made on the 9th day of April 1997
BETWEEN
BAN LENG FIBRE SDN. BHD. (Company No. 114321 A) a company incorporated in
Malaysia with its registered office at No. TBP, 3115, Mk. 14, Bukit Minyak,
14000 Bukit Mertajam (hereinafter called "the Landlord") of the one part
AND
GSI/CUMBERLAND SDN. BHD. (Company No. 392746-V) a company incorporated in
Malaysia with its registered office at No. 51, 1st Floor, Jalan Todak 4, Pusat
Bandar Seberang Jaya, 13700 Perai (hereinafter called "the Tenant") of the
other part.
WHEREAS
The Landlord is the owner of a property shaded in green colour shown at
"Appendix I" bearing the assessment number 2471, Lorong Perusahaan 10, Prai,
measuring at 37,600 square feet in area (hereinafter referred to as "the Demised
Premises").
AND WHEREAS
The Landlord is desirous of letting and the Tenant of accepting a tenancy of the
whole of the Demised Premises upon the terms and conditions hereinafter set
forth.
NOW THIS AGREEMENT WITNESSETH as follows:
1. Subject to the stipulations terms and conditions hereinafter contained, the
Landlord shall permit the Tenant to take possession of the Demised Premises
for the whole month of April, 1997 (hereinafter referred to as "the
renovation period") for the purpose of carrying out renovation works, or
fitting out works required by the Tenant. The Tenant hereby acknowledges
and agrees with the Landlord that during the renovation period he is a mere
licensee of the Landlord.
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2. The Landlord shall grant and the Tenant shall accept a tenancy of the
Demised Premises to be held by the Tenant as Tenant for a term of two (2)
years from the 1st day of May, 1997 and ending on 30th April, 1999
(hereinafter referred to as "the First Term") at a monthly rental of
Ringgit Malaysia Thirty Thousand (RM30,000-00) Only to be paid by the 7th
day of each month, with an option for renewal for a further period of one
(1) year (hereinafter referred to as "Second Term") subject to the
provisions of Clause 6.1, 6.3 and 6.4 herein contained provided. The Tenant
shall before the expiry of First Term give to the Landlord three (3) months
notice in writing of their intention to exercise the said option.
3. The Tenant shall pay to the landlord on the execution of this Agreement an
amount equivalent to:-
(a) Two (2) month's rent being Ringgit Malaysia Sixty Thousand
(RM60,000-00) Only by way deposit as security for the due observance
and performance of the Tenant's covenants terms and conditions above
and hereunder; and
(b) The First month rental shall be paid on or before the 1st day of May,
1997.
The Deposit sum shall be maintained at this figure during the First Term of this
Tenancy and shall not without the previous consent in writing of the Landlord be
deemed to be treated as payment of rent and the same shall be returned to the
Tenant free of interest within 14 days of the natural determination of this
tenancy less such sums as may then be due to the Landlord but without prejudice
to any other claims which the Landlord may have against the Tenant under the
terms of this tenancy. If either the Landlord or Tenant were to terminate
the tenancy prematurely during the First Term, the terminating party would pay
to the other the sum of Ringgit Malaysia Sixty Thousand (RM60,000-00) Only or
that part thereof as represents the Landlord's loss and without prejudice to the
Landlord's right to claim in addition thereto damages against the Tenant for
breach of this tenancy.
4. THE TENANT HEREBY COVENANT WITH THE LANDLORD as follows:-
4.1 To pay the Landlord the rent hereby reserved on the days and in the
manner aforesaid:
4.2 The Tenant shall pay all telephone, water and electricity charges
incurred by the Tenant and the deposit in respect of the telephone,
water and electricity and other amenities supplied and consumed at any
shall be wholly responsible by the Tenant thereafter and shall fully
indemnify the Landlord against all claims, actions and legal
proceedings whatsoever made against the Landlord by any person in
respect thereof.
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4.3 To keep the interior of the Demised Premises, the flooring and
interior plaster or other surface material on walls and ceilings and
the Landlord's fixtures and fittings thereon including the existing
doors, windows, glass, shutters, locks, fastening, installations and
fittings for light and power in good and tenantable repair and clean
condition (fair wear and tear excepted) and to replace or repair any
of the aforesaid items and if any part of the Demised Premises and
the Landlord's fixtures and fittings therein shall be broken or
damaged due to malicious negligent or careless acts or omissions of
the Tenant and further that if any damage is caused to the Landlord
or to any person whomsoever directly or indirectly through the said
damaged condition of the interior of the Demised Premises (including
flooring, surface material on walls and ceilings, doors windows and
the Landlord's fixtures and fittings) the Tenant shall be wholly
responsible thereafter and shall fully indemnify the Landlord against
all claims, actions and legal proceedings whatsoever made against the
Landlord by any person in respect thereof.
4.4 Subject to Clause 6.1 and always to the rights of the Tenant to
insist that the Landlord its agents or workmen shall be accompanied
by a representative of the Tenant to permit the Landlord its agents
or workmen at all reasonable times upon prior written notice (i.e. by
giving one day notice) being given by the Landlord to enter upon and
view the condition of the Demised Premises and to take inventories
of the Landlord's fixtures and fittings therein and to do structural
or external repairs to the Demised Premises. The Landlord may serve
upon the Tenant notice in writing specifying any repairs or work
necessary to be done or replacement necessary to be made to comply
with the Tenant's covenants to repair herein contained, provided that
the list of such repairs and works shall be reasonable and agreed by
the Tenant. The Tenant shall execute such repairs and work within 14
days after the service of such notice failing which it shall be
lawful for the Landlord to enter upon the Demised Premises and
execute such repairs or work or make such replacements and the cost
thereof shall be debt due from the Tenant to the Landlord and be
forthwith recoverable by action.
4.5 Upon prior one-day written notice in writing by the Landlord to
permit the Landlord its agents or workmen to enter upon the Demised
Premises to lay fix in and lead through the Demised Premises all such
wires and cables for electricity and pipes for water gas and sewage
as the Landlord may from time to time require to be laid fixed
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in and lead through the Demised Premises for the general purposes of
the said Building or otherwise and also to permit the Landlord its
agents or workmen to enter upon the Demised Premises for the purpose
of repairing removing and replacing all or any of the said wires
cables and pipes. PROVIDED ALWAYS that the Landlord shall not
interfere with the Tenant's use of the Demised Premises by the Tenant
and shall forthwith fully indemnify the Tenant against all loss and
damage occasioned by the exercise of such rights whether caused by
its agents, servants, licensees or independent contractors".
4.6 The Tenant shall not store or bring upon the Demised Premises arms,
ammunition or unlawful goods, gun-powder, salt-petre, kerosene or any
explosive or combustible substance or any materials the keeping of
which may contravence any local ordinance statute regulation or bye-
law in any part of the Demised Premises and to keep the Demised
Premises in a clean and sanitary condition.
4.7 Not to use the Demised Premises for any illegal, unlawful or immoral
purposes and not to do or permit to be done any act or thing which
may become a nuisance or give reasonable cause for complaint from any
of the occupiers of any other units adjoining the Demised Premises.
4.8 To observe and comply with all laws, bye-law rules and regulations
affecting a tenant or occupier of the Demised Premises which are now
in force or which may hereafter be in force.
4.9 The Tenant shall not use the Demised Premises or any part thereof
carrying on any business which causes the accumulation of dirt,
rubbish or debris of any sort in or outside the Demised Premises or
which causes an undesirable amount of noise or smell which in the
reasonable opinion of the Landlord is undesirable or unsuitable for
the other Tenants or occupiers of the Demised Premises or the
neighbouring buildings.
4.10 Not to do or permit or suffer to be done anything whereby the policy
or policies of insurance on the Demised Premises against damage by
fire may be increased and to make good all damage suffered by the
Landlord and to repay to the Landlord on demand all sums paid by them
by way of increased premium and all expenses incurred by the Landlord
in or about any renewal of such policy or policies rendered necessary
by a breach or non-observance of this covenant without the prejudice
to the other rights of the Landlord.
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4.11 Not to install any electrical sockets plugs or electrical power
points or electrical motor or engine or appliance or air-conditioner
without the previous written consent of the Landlord which consent
shall not be unreasonably withheld. In event that the Tenant commits
a breach of this covenant and as a result of which the Landlord
suffers any loss or damage the Tenant will forthwith indemnify the
Landlord against all such loss or damage.
4.12 Not to damage or to deface or to cause or to permit any servant agent
or licensee of the Tenant to damage or to deface any part of the
Demised Premises while moving any plant machinery furniture equipment
fittings fixture or any other thing whatsoever or by any means
whatsoever and to forthwith repair and make good to the satisfaction
of or to pay to the Landlord for the cost of making good such damage
or defacement.
4.13 To keep the Demised Premises clean and particularly the flooring and
paint works thereof in good maintenance and condition PROVIDED THAT
the Landlord acknowledges that the Tenant is using the Demised
Premises for the purpose and nature of their business and the Tenant
shall reinstate the Demised Premises to the same standard and
condition as at the date of this Agreement.
4.14 To yield up the Demised Premises with the fixtures fittings
(inclusive the agreed Tenant's renovated items) and additions thereto
at the expiration or sooner determination of the term of tenancy
hereby granted in good and substantial repair and condition (normal
wear or tear excepted) in accordance with the several covenants
hereinbefore contained except with the written consent in writing
from the Landlord in respect of removal of the fixtures, fittings and
additional items fixed or renovated by the Tenant during the Tenure
thereto.
4.15 To pay reimburse and/or to indemnify and keep the Landlord
indemnified against all costs expenses and any other fees including
the Landlord's solicitors' fees (on a solicitor and client basis)
incurred in connection with demanding and enforcing payment of any
monies payable by the Tenant under the terms of this Agreement or
otherwise howsoever in enforcing any of the terms conditions and
stipulations herein contained.
4.16 Shall observe and perform all rules and regulations governing the
car-park areas and other common areas in or around the said Demised
Premises and shall indemnify and keep indemnified the Landlord
against all actions proceedings claims costs expenses and demands in
respect of any breach by the Tenant, his visitors, servants,
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agents or licensee while in the Demised Premises or the common areas
PROVIDED THAT such breach shall not have been caused any omission,
act, negligence or default of the Landlord, its agents, independent
contractors, servants or licensees.
4.17 To pay reimburse and/or indemnify and keep the Landlord fully
indemnified against all costs, expenses and charges incurred as
result of the water treatment which is essential for the compliance
of rules regulations or by-laws of the local authorities or statutory
bodies.
5. THE LANDLORD HEREBY COVENANTS WITH THE TENANT as follows:-
5.1 To pay all quit rent assessment municipal rates service charges
outgoings whatsoever (other than those covenanted to be paid by the
Tenant hereunder) which are now or hereafter payable in respect of
the Demised Premises.
5.2 To permit the Tenant to upgrade the TNB transformer and internal
electricals within the Demised Premises by qualified Electricians to
fit the purpose of the tenancy.
5.3 To permit the Tenant if it punctually pays the rent hereby reserved
and other charges and observes the stipulations on its part herein
contained peaceably to enjoy the Demised Premises without any
interruption or disturbance by the Landlord or those lawfully
claiming under or in trust for the Landlord.
5.4 To maintain the ceiling, structure and external walls of the Demised
Premises and to keep all electrical wiring and cables, sewage and
sanitary pipes and other fixtures serving the Demised Premises in
good and tenantable condition and to bear the cost of repairs or
replacements where necessary.
5.5 To keep the car park areas and other common areas clean and well
lighted and to insure and keep insured the Demised Premises against
loss or damage by fire and such other risks and the Landlord shall
deem desirable.
5.6 To refund within fourteen (14) days of the Second Term to the Tenant
the said sums specified in Clause 6.4 hereof less any deduction
authorised to be made pursuant to this Agreement.
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6. PROVIDED ALWAYS AND IT IS HEREBY AGREED as follows:-
6.1 If the rent hereby reserved or any part thereof or any other sums
herein payable shall be in arrears or shall be unpaid for fourteen
(14) days after service of a written notice to the Tenant or any of
the convenants or agreements on the Tenant's part herein contained
shall not be performed or observed or if the Tenant shall have a
receiving order made against it or shall make an assignment for the
benefit of its creditors or enter into any agreement or make any
agreement with its creditors by composition or otherwise shall pass
or permit to pass any resolution for the winding up of the Tenant
(whether voluntarily or otherwise) or suffer any distress or
attachment or execution to be levied against its goods then and in
any such cases, it shall be lawful for the Landlord at any time
thereafter to re-enter upon the said Demised Premises or any part
thereof in the name of the whole and to repossess the said furniture
and to take possession of the Demised Premises whereupon the tenancy
hereby created shall absolutely determine and cease to be of any
further effect but without prejudice to any of the Landlord's right
of action against the Tenant in respect of any antecedent breach by
the Tenant of any of the Tenant's covenants herein contained PROVIDED
ALWAYS THAT such re-entry and termination of the tenancy and nothing
herein contained shall prejudice any other rights or remedies which
the Landlord may be entitled at law or in equity.
6.2 In amplification and not derogation of any other rights or remedies
which the Landlord may have under the provisions of this agreement or
at law the Tenant hereby expressly agrees covenants and undertakes to
indemnify and reimburse the Landlord in respect of any payments make
or any outgoings paid by the Landlord for which the Tenant is liable
under this Agreement in the event that the Deposit referred to in
Clause 3(a) or in Clause 6.4 below (as the case may be) hereof is
insufficient for the purposes stipulated therein.
6.3 If the Tenant is desirious of continuing the Tenancy hereby created
for a further term of One (1) year (hereinafter referred to as "the
Second Term") at the expiration of the First Term hereby created, and
shall give to the Landlord three (3) month's prior notice in writing
of such his desire and if the Tenant shall have paid the rent hereby
reserved punctually and performed all the stipulations herein
contained during the First
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Term then subject to clause 6.4 and the revised monthly rental which
shall be equivalent to the rent payable immediately before such
revision, the Landlord shall let the Demised premises to the Tenant
for the Second Term at the agreed monthly rental and subject in all
other respects to the same stipulations as are herein contained with
the exception of Clause 6.4 and this Clause.
6.4 The Tenant shall at the beginning of Second Term (i.e. on or before
the 1st day of May, 1999) ensure and maintain the Deposit referred to
in clause 3(a) aforestated (which shall be equivalent to two (2)
months rental of the Second Term rental) for securing the due
observance and performance of the same Tenant's covenants terms and
conditions as are herein contained with the exception of Clause 6.3
and this clause.
6.5 The Tenant shall at his own cost and expense to apply to the relevant
authority for the installation of the meter for the water and/or
electricity.
6.6 The parties hereby agree that all charges, claims expenses of the
"Bomba" shall be borne equally by both parties.
6.7 Any notice under this Agreement shall be in writing. Any notice to
the Landlord shall be sufficiently served if sent to the Landlord at
the address hereto before set out or such other last known address of
the Landlord by registered post with postage prepaid. Any notice to
the Tenant shall be sufficiently served if sent to the Tenant at the
address of the said Demised Premises or last known address of the
Tenant by registered post with postage prepaid or left at the
aforesaid address last known address or office of the Tenant as the
case may be. Any notice sent by registered post to the Tenant shall
be deemed to have given at the time when in due course of post it
would have been delivered at the address to which it is sent.
6.8 This Agreement shall be binding upon the Landlord and Tenant,
permitted lawful assigns and successors-in-title of the parties
hereto. Each party shall be entitled to lawful assign its interests
under this Agreement to its related entity and no prior consent of
the other party shall be required.
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6.9 The costs, charges and/or expenses for the preparation of this
agreement and stamp duty shall be borne by the Landlord and Tenant
equally. Nevertheless, in the event a fresh tenancy agreement for the
second term is necessary; all costs, charges and stamp duty for the
fresh tenancy agreement shall be borne by the Tenant absolutely.
6.10 If at any time during the continuance of this Tenancy, any of the
following events (hereinafter called "the Event") shall occur, that
is:
a. the Demised Premises or any part thereof shall become
substantially unsafe or unfit for occupation or use, as
determined by the appropriate authority or the Landlord's
Architect or engineers, from any disabling cause other than the
act or default of the Tenant; or
b. the Demised Premises or any part thereof shall be destroyed or
damaged so as to become unsafe or unfit for occupation or use by
fire, water, storm, tempest, earthquake, insects, theft,
burglary, explosion, riots, civil, commotion, enemy action or
other inevitable cause then and in each case the monthly rent
shall be suspended and cease to be payable from the date of the
happening of the Event until the Demised Premises shall have been
again rendered fit for occupation and use. In the event the
Demised Premises or any part thereof shall not have been rendered
fit for occupation and use within two (2) months after the
happening of the Event, then the Tenant shall be entitled to
terminate this Tenancy by giving a notice in writing of thirty
(30) days to the Landlord of its intention to do so and
thereafter this Tenancy shall be deemed terminated and the
Landlord shall forthwith refund the Deposit to the Tenant within
fourteen (14) days thereafter each party shall not have any claim
whatsoever against the other save and except for any antecedent
breach.
6.11 This Agreement shall be governed by and construed in all respects in
accordance with the laws of Malaysia. The parties hereto hereby agree
they shall submit to the non-exclusive jurisdiction of the Courts of
the States of Malaysia in all matters connected with the obligations
and liabilities of the parties hereto under or arising out of this
Tenancy.
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6.12 Time wherever mentioned in this Agreement shall be of the essence of
this contract.
6.13 Any indulgence given by the Landlord shall not constitute a waiver of
or prejudice the Landlord's rights contained in this Agreement.
6.14 In this Agreement where the context so admits:-
a) words importing feminine gender only shall include the masculine
and neuter gender;
b) words in the singular number shall include the plural number and
words in the plural number shall include the singular number;
c) where there are two (2) or more persons or parties included or
comprised in the expressions "the Landlord" or "the Tenant"
agreement covenants terms stipulations and undertaking expressed
to made by and on behalf of the Landlord or the Tenant shall be
deemed to be made by or binding upon such persons or parties
jointly and severally.
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IN WITNESS WHEREOF the parties hereto have hereunto set their hands the day and
year first above written.
SIGNED by TANG AH BAH ) BAN LENG FIBRE SDN. BHD.
for and on behalf of ) /s/ BAN LENG FIBRE SDN. BHD.
----------------------------
in the presence of :- ) BAN LENG FIBRE SDN. BHD.
SIGNED by GOH BAK YAN ) GSI/CUMBERLAND Sdn. bhd.
(392746-V)
for and on behalf of ) /s/ GSI/CUMBERLAND SDN. BHD.
----------------------------
in the presence of :- ) GSI/CUMBERLAND SDN. BHD.
<PAGE>
In pursuance of the Tenancy Agreement, dated 9th day April, 1997, the following
stipulated terms and conditions shall be read and construed as part of the
essential part of the tenancy agreement:-
1. The Landlord hereby further covenant with the Tenant as follows:-
(i) To allow the Tenant to sub-let partly or wholly, of the Demised
Premises;
(ii) To clean up the Demised Premises on or before the 1st day May,
1997;
(iii) To dismantle the existing inner gate and to install a gate at the
main entrance of the Demised Premises in accordance to the
Tenant's request;
(iv) To clean and clear up the front part of the Demised Premises
without removing the trees;
(v) To repair and relevel the flooring of Building 1 and to cleanse
the floors of Building 2 and Building 3;
(vi) To refurbish the existing bathrooms for the Demised Premises;
(vii) To check, replace and renew all the existing fire extinguishers,
hose, water sprinkle system (if any) installed at the Demised
Premises;
(viii) To ensure the operation of the overhead power door for Building
2;
(ix) to maintain and refurbish (if necessary) the main switchboard and
all electrical system of the Demised Premises and to ensure all
of which are in good order.
(x) to take reasonable precaution over the fire suppression within
the vicinity of the Demised Premises and keep up to the
satisfactory condition acceptable by the insurance company;
(xi) to maintain a pavement in front of the Demised Premises at the
satisfactory condition;
(xii) to furnish keep, maintain and ensure the office structure to the
satisfaction of the Tenant.
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<TABLE>
<CAPTION>
Exhibit 10.8
No. 50--Uniform Lease
Printed Yee & Lukens Co., Philadelphia, Pa 19107
(C) Richard Marz--I.L. Messer Revision
Lease Agreement
<C> <S> <C>
1. Parties This Agreement, MADE THE First day of November one thousand nine hundred and Ninety Six (1996), by
between RVIP (hereinafter called Lessor), of the one part, and Clark Products, Inc. (hereinafter called
Lessee), of the other part.
2. Premises WITNESSETH THAT: Lessor does hereby demise and let unto Lessee all that certain Office #'s 100, 104, 106,
105, 110, 112, and 114 (approx. 1300 square feet @ $10. per sq ft.) Work rooms #130, 134, 142, and 144
(approx. 9.145 sq ft. @ $3.50 sq ft.) in the Township of Aston State of Pennsylvania, to be used and
occupied as Light manufacturing & related offices and for no other purpose, for the term of Three years
3. Term beginning the First day of November, one thousand nine hundred and Ninety six (1996), and ending the Last
day of October, one thousand nine hundred and Ninety nine (1999), for the minimum Annual rental of Forty
Five Thousand Dollard ($45,000.) lawful money of the United States of America, payable in monthly
4. Minimum Rent installments in advance during the said term of this lease, or any renewal hereof, in sums of Three Thousand
Seven Hundred Fifty Dollars ($3,750.) on the First day of each month, rent to begin from the First day of
November, 1996.
the first installment to be paid t the time of signing this lease. The first rental payment to be made
during the occupancy of the premises shall be adjusted to pro-rate a partial month of occupancy, if any,
at the inception of this lease.
The existing $26,200. rent arrearage will be liquidated at $250. per month over this lease with a
$17,200. ballon payment on October 30, 1999.
All utilities for work area will be metered and billed at PECO rates. Utilities useage will be billed
at $200 per month until metering is completed. Lessor will provide utilities for office area.
5. Inability to give
Possession If Lessor is unable to give Lessee possession of the demised premises, as herein provided, by reason
of the holding over of a previous occupant, or by reason of any cause beyond the control of the Lessor, the
Lessor shall not be liable in damages to the Lessee therefor, and during the period that the Lessor is
unable to give possession, all rights and remedies of both parties hereunder shall be suspended, and if
Lessor is unable for any reason to give possession of the demised permises within 5 days of Lessee's
demand therefor following commencement of the term hereof Lessee shall have the option, by notice to
Lessor, to cancel this lease agreement and receive return of any prepaid rents and security deposit in
full and final settlement of any and all claims against Lessor.
6. Additional Rent (a) Lessee agrees to pay as rent in addition to the minimum rental herein reserved any and all sums
(a) Damages for which may become due by reason of the failure of Lessee to comply with all of the covenants of this lease
Default and any and all damages, costs and expenses which the Lessor may suffer or incur by reason of any default
of the Lessee or failure on his part to comply with the covenants of this lease, and each of them, and also
any and all damages to the demised premises caused by any act or neglect of the Lessee.
(b) Taxes
(c) Fire Insurance (c) Lessee further agrees to pay to Lessor as additional rent all increase or increases in fire
Premiums insurance premiums upon the demised premises and/or the building of which the demised premises is a part,
due to an increase in the rate of fire insurance in excess of the rate on the demised premises at the time
of making this lease, if said increase is caused by any act or neglect of the Lessee or the nature of the
Lessee's business.
7. Place of Payment All rent shall be payable without prior notice or demand at the office of Lessor, or at such other
place as Lessor may from time to time designate by notice in writing.
8. Affirmative Cove- Lessee covenants and agrees that he will without demand
ments of Lessee (a) Pay the rent and all other charges herein reserved as rent at the times and at the place that the
(a) Payment of same are payable, without fail; and if Lessor shall at any time or times accept said rent or rent charges
Rent after the same shall have become delinquent, such acceptance shall not excuse delay upon subsequent
occasions, or constitute or be construed as rent and/or any other charges, expenses, or costs herein
agreed to be paid by Lessee may be proceeded for any recovered by Lessor by legal process in the same
manner as rent due and in arrears.
(b) Cleaning, (b) Keep the demised premises clean and free from all ashes, dirt and other refused matter; replace
Repairing, etc. all glass windows, doors, etc., broken; keep all waste and drain pipes open; repair all damage to plumbing
and to the premises in general; keep the same in good order and repair as they are now, reasonable wear and
tear and damage by accidental fire or other casualty not occurring through negligence of Lessee or those
employed by or acting for Lessee alone excepted. The Lessee agrees to surrender the demised premises in
the same condition in which Lessee has herein agreed to keep the same during the continuance of the lease.
(c) Requirements (c) Comply with any requirements of any of the constituted public authorities, and with terms of any
of Public State or Federal statute or local ordinance or regulation applicable to Lessee or his use of the demised
Authorities premises, and save Lessor harmless from penalties, fines, costs or damages resulting from failure so to do.
(d) Fire (d) Use every reasonable precaution against fire.
(e) Rules and (e) Comply with rules and regulations of Lessor promulgated as hereinafter provided.
Regulations
(f) Surrender of (f) Peaceably deliver up and surrender possession of the demised premises to the Lessor at the
Possession expiration or sooner termination of this lease, promptly delivering to Lessor at his office all keys for
the demised premises.
(g) Notice of (g) Give to Lessor prompt written notice of any accident, fire, or damage occurring on or to the
Fire, etc. demised premises.
(h) Condition of (h) Lessee shall be responsible for the condition of the pavement, curb, cellar, doors, awnings and
Pavement others erections in the pavement during the term of this lease; shall keep the pavement free from snow and
ice; and shall be hereby agrees that Lessee is solely liable for any accidents, due or alleged to be due to
their defective condition, or to any accumulations of snow and ice.
(i) Agency on (i) The Lessee agrees that if, with the permission in writing of Lessor, Lessee shall vacate or decide
Removal at any time during the term of this lease, or any renewal thereof, to vacate the herein demised prior to
the expiration of this lease, or any renewal hereof, Lessee will not cause or allow any other agent to
represent Lessee in any sub-sub-letting or reletting or the demised other than an agent approved by the
Lessor and that should Lessee do so, or attempt to do so, the Lessor may signs that may be placed on or
about the demised premises by such other agent without any liability to Lessor or to said agent, Lessee
assuming all responsibility for such action.
(l) Indemnification (j) Indemnify and save Lessor harmless from any and all loss occasioned by Lessee's breach of any of
the convenants terms and conditions of this lease, or caused by his family, guests, visitors, agents and
employees.
9. Negative-Cove Lessee convenants and agrees that he will do none of the following things without first obtaining the
nents of Lessee consent, in writing of Lessor, which consent Lessor shall not unreasonably withhold, and without providing
lessor with Lessor with reimbursement for any expenses incurred or incidental to Leasee's proposed action.
(a) Use of (a) Occupy the demised premises in any other manner or for any other purpose than as above set forth.
Premises (b) Assign, mortgage or pledge this lease or under-let or sub-lease the demised premises, or any
(b) Assignment part thereof, or permit any other person, firm or corporation to occupy the demised premises, or any part
and Subletting thereof; nor shall any assignee or sub-leasee assign, mortgage or pledge this lease or such sub-lease,
without an additional written consent by the Lessor, and without such consent no such assignment, mortgage
or pledge shall be valid. If the lessee becomes embarrassed or insolvent, or makes an assignment for the
benefit of creditors, or if a petition in bankruptcy is filed by or against the Lessee or a bill in equity
or other proceeding for the appointment of a receiver for the Lessee is filed, or if the real or personal
property of the Lessee shall be sold or levied upon by any Sheriff, Marshal or Constable, the same shall be
a violation of this covenant.
</TABLE>
<PAGE>
Signs
(c) Place or allow to be placed any stand, booth, sign or show case upon
the doorsteps, vestibules or outside walls or pavements of said premises, or
paint, place, erect or cause to be painted, placed or erected any sign,
projection or device on or in any part of the premises. Lessee shall remove any
sign, projection or device painted, placed or erected, if permission has been
granted and restore the walls, etc., to their former conditions, at or prior to
the expiration of this lease. In case of the breach of this covenant (in
addition to all other remedies given to Lessor in case of the breach of any
conditions or covenants of this lease) Lessor shall have the privilege of
removing said stand, booth, sign, show case, projection or device, and restoring
said walls, etc., to their former condition, and Lessee, at Lessor's option,
shall be liable to Lessor for any and all expenses so incurred by Lessor.
Alterations Improvements
(d) Make any alterations, improvements, or additions to the demised
premises. All alterations, improvements, additions or fixtures, whether
installed before or after the execution of this lease, shall remain upon the
premises at the expiration or sooner determination of this lease and become the
property of Lessor, unless Lessor shall, prior to the determination of this
lease, have given written notice to Lessee to remove the same, in which event
Lessee will remove such alterations, improvements and additions and restore the
premises to the same good order and condition in which they now are. Should
Lessee fail so to do, Lessor may do so, collecting, at Lessor's option, the cost
and expense thereof from Lessee as additional rent.
Machinery
(e) Use or operate any machinery that, in Lessor's opinion, is harmful to
the building or disturbing to other tenants occupying other parts thereof.
Weights
(f) Place any weights in any portion of the demised premises beyond the
safe carrying capacity of the structure.
Fire Insurance
(g) Do or suffer to be done, any act, matter or thing objectionable to the
fire insurance companies whereby the fire insurance or any other insurance now
in force or hereafter to be placed on the demised premises, or any part thereof,
or on the building of which the demised premises may be a part, shall become
void or suspended, or whereby the same shall be rated as a more hazardous risk
than at the date of execution of this lease, or employ any person or persons
objectionable to the fire insurance companies or carry or have any benzine or
explosive matter of any kind in and about the demised premises. In case of a
breach of this covenant (in addition to all other remedies given to Lessor in
case of the breach of any of the conditions or covenants of this lease) Lessee
agrees to pay to Lessor as additional rent any and all increase or increases of
premiums on insurance carried by Lessor on the demised premises, or any part
thereof, or on the building of which the demised premises may be a part, caused
in any way by the occupancy of Lessee.
Removal of Goods
(h) Remove, attempt to remove or manifest an intention to remove Lessee's
goods or property from or out of the demised premises otherwise than in the
ordinary and usual course of business, without having first paid and satisfied
Lessor for all rent which may become due during the entire term of this lease.
Vacate Premises
(i) Vacate or desert said premises during the term of this lease, or
permit the same to be empty and unoccupied.
Lessor's Rights
Lessee covenants and agrees that Lessor shall have the right to do the
following things and matters in and about the demised premises:
Inspection of Premises
(a) At all reasonable times by himself or his duly authorized agents to go
upon and inspect the demised premises and every part thereof, and/or at his
opinion to make repairs, alterations and additions to the demised premises or
the building of which the demised premises is a part.
Rules and Regulations
(b) At any time or times and from time to time make such reasonable rules
and regulations as may be necessary or desirable for the safety, care, and
cleanliness of the demised premises and/or of the building of which the demised
premises is a part and of real and personal property contained therein and for
the preservation of good order. Such rules and regulations shall, when
communicated in writing to Lessee, form a part of this lease.
Sale or Rent, Sign Prospective Purchasers or Tenants
(c) To display a "For Sale" sign at any time, and also, after notice from
either party of intention to determine this lease, or at anytime within three
months prior to the expiration of this lease, a "For Rent" sign, or both "For
Rent" and "For Sale" signs; and all of said signs shall be placed upon such part
of the premises as Lessor may elect and may contain such matter as Lessor shall
require. Persons authorized by Lessor may inspect the premises at reasonable
hours during the said periods.
Discontinue Facilities and Service
(d) Lessor may discontinue at any time, any or all facilities furnished
and services rendered by Lessor not expressly convenanted for herein or required
to be furnished or rendered by law; it being understood that they constitute no
part of the consideration for this lease.
Responsibility of Lessee
(a) Lessee agrees to relieve and hereby relieves the Lessor from all
liability by reason of any injury or damage to any person or property in the
demised premises, whether belonging to the Lessee or any other person caused by
any fire, breakage, or leakage in any part or portion of the building of which
the demised premises is a part or from water, rain or snow that may leak into,
issue or flow from any part of the said premises, or of the building of which
the demised premises is a part, from the drains, pipes, or plumbing work of the
same, or from any place or quarter, unless such breakage, leakage, injury or
damage be caused by or result from the negligence of Lessor or its servants or
agents.
(b) Lessee also agrees to relieve and hereby relieves Lessor from all
liability by reason of any damage or injury to any property or to Lessee or
Lessee's guests, servants or employees which may arise from or be due to the
use, misuse or abuse of all or any of the elevators, hatches, openings,
stairways, hallways of any kind whatsoever which may exist or hereafter be
erected or constructed on the said premises or the sidewalks surrounding the
building of which may arise from defective construction, failure of water
supply, light, power, electric wiring, plumbing or machinery, wind, lightning,
storm or any other cause whatsoever on the said premises or the building of
which the demised premises is a part, unless such damage, injury, use, misuse or
abuse be caused by or result from the negligence of Lessor, its servants or
agents.
Responsibility of Lessor
Total Destruction of Premises
(a) In the event the demised premises are totally destroyed or so damaged
by fire or other casualty that, in the opinion of a licensed architect retained
by Lessor, the same cannot be repaired and restored within ninety days from the
happening of such injury this lease shall absolutely cease and determine, and
the rent shall abate for the balance of the term.
Partial Destruction of Premises
(b) If the damage be only partial and such that the premises can be
restored, in the opinion of a licensed architect retained by Lessor, to
approximately their former condition within ninety days from the date of the
casualty loss Lessor may, at Lessor's option, restore the same with reasonable
promptness, reserving the right to enter upon the demised premises for that
purpose. Lessor also reserves the right to enter upon the demised premises
whenever necessary to repair damage caused by fire or other casualty to the
building of which the demised premises is a part, even though the effect of such
entry be to render the demised premises or a part thereof untenantable. In
either event the rent shall be apportioned and suspended during the time Lessor
is in possession, taking into account the proportion of the demised premises
rendered untenantable and the duration of Lessor's possession. If a dispute
arises as to the amount of rent due under this clause, Lessee agrees to pay the
full amount claimed by Lessor, but Lessee shall have the right to proceed by law
to recover the excess payment, if any.
Repairs by Lessor
(c) Lessor shall make such election to repair the premises or terminate
this lease by giving notice thereof to Lessee at the leased premises within
thirty days from the day Lessor received notice that the demised premises had
been destroyed or damaged by fire or other casualty.
Damage for Interruption of Use
(d) Except to the extent hereinbefore provided, Lessor shall not be liable
for any damage, compensation, or claim by reason of the necessity of repairing
any portion of the building, the interruption in the use of the premises, any
inconvenience or annoyance arising as a result of such repairs or interruption,
or the termination of this lease by reason of damage to or destruction of the
premises.
Representation of Condition of Premises
(e) Lessor has let the demised premises in their present "as is" condition
and without any representations, other than those specifically endorsed hereon
by Lessor, through its officers, employees, servants and/or agents. It is
understood and agreed that Lessor is under no duty to make repairs, alterations,
or decorations at the inception of this lease or at any time thereafter unless
such duty of Lessor shall be set forth in writing endorsed hereon.
Zoning
(f) It is understood and agreed that the Lessor hereof does not warrant or
undertake that the Lessee shall be able to obtain a permit under any Zoning
Ordinance or Regulation for such use as Lessee intends to make of the said
premises, and nothing in this lease contained shall obligate the Lessor to
assist Lessee in obtaining said permit; the Lessee further agrees that in the
event a permit cannot be obtained by Lessee under any Zoning Ordinance or
Regulation, this lease shall not terminate without Lessor's consent, and the
Lessee shall use the premises only in a manner permitted under such Zoning
Ordinance or Regulation.
Miscellaneous Agreements and Conditions
Effect of Repairs on Rental
(a) No contract entered into or that may be subsequently entered into by
Lessor with Lessee, relative to any alterations, additions, improvements or
repairs, nor the failure of Lessor to make such alterations, additions,
improvements or repairs as required by any such contract, nor the making by
Lessor or his agents or contractors of such alterations, additions, improvements
or repairs shall in any way affect the payment of the rent or said other charges
at the time specified in this lease, expect to the extent and in the manner
hereinbefore provided.
Agency
(b) It is hereby expressly agreed and understood that the
said.......................................is acting as agent only and shall not
in any event be held liable to the owner or to Lessee for the fulfillment or
non-fulfillment of any of the terms or conditions of this lease, or for any
action or proceedings that may be taken by the owner against Lessee, or by
Lessee against the owner.
Waiver of Custom
(c) It is hereby covenanted and agreed, any law, usage or custom to the
contrary notwithstanding, that Lessor shall have the right at all times to
enforce the covenants and provisions of this lease in strict accordance with the
terms hereof, notwithstanding any conduct or custom on the part of the Lessor in
refraining from so doing at any time or times; and, further, that the failure of
Lessor at any time or times to enforce has rights under said convenants and
provisions strictly in accordance with the same shall not be construed as having
created a custom in any way or manner contrary to the specific terms, provisions
and covenants of this lease or as having in any way or manner modified the same.
Conduct of Lessee
(d) This lease is granted upon the express condition that Lessee and/or
the occupants of the premises herein leased shall not conduct themselves in a
manner which is improper or objectionable, and if at any time during the term of
this lease or any extension or continuation thereof Lessee or any occupier of
the said premises shall have conducted himself in a manner which is improper or
objectionable, Lessee shall be taken to have broken the covenants and conditions
of this lease, and Lessor will be entitled to all of the rights and remedies
granted and reserved herein, for the Lessee's failure to observe all of the
covenants and conditions of this lease.
Failure of Lessee to Repair
(e) In the event of the failure of Lessee promptly to perform the
covenants of Section 8(b) hereof, Lessor may go upon the demised premises and
perform such covenants, the cost thereof, at the sole option of Lessor, to be
charged to Lessee as additional and delinquent rent.
Waiver of Subrogation
(f) Lessor and Lessee hereby agree that all insurance policies which each
of them shall carry to insure the demised premises and the contents therein
against casualty loss, and all liability policies which they shall carry
pertaining to the use and occupancy of the demised premises shall contain
waivers of the right of subrogation against Lessor and Lessee herein, their
heirs, administrators, successors, and assigns.
Security Interest
(g) Lessee hereby grants to Lessor a security interest under the Uniform
Commercial Code in all of Lessee's goods and property in, on, or about the
demised premises. Said security interest shall secure unto Lessor the payment of
all rent (and charges collectible or reserved as rent) hereunder which shall
become due under the provisions of this lease. Lessee hereby to execute, upon
request of Lessor, such financing statements as may be required under the
provisions of the said Uniform Commercial Code to perfect a security interest in
Lessee's said goods and property.
Remedies of Lessor
If the Lessee
(a) Does not pay in full when due any and all installments of rent and/or
any other charge or payment herein reserved, included, or agreed to be treated
or collected as rent and/or any other charge, expense, or cost herein agreed to
be paid by the Lessee, or
(b) Violates or fails to perform or otherwise breaks any covenant or
agreement herein contained; or
(c) Vacates the demised premises or removes or attempts to remove or
manifests an intention to remove any goods or property therefrom otherwise than
in the ordinary and usual course of business without having first paid and
satisfied the Lessor in full for all rent and other charges then due or that may
thereafter become due until the expiration of the then current term, above
mentioned; or
(d) Becomes embarrassed or insolvent, or makes an assignment for the
benefit of creditors, or if a petition in bankruptcy is filed by or against
Lessee or a complaint in equity or other proceedings for the appointment of a
receiver for Lessee is filed, or if proceedings for reorganization or for
composition with creditors under any State or Federal law be instituted by or
against Lessee, or if the real or personal property of Lessee shall be levied
upon or be sold, or if for any other reason Lessor shall, in good faith, believe
that Lessee's ability to comply with the covenants of this lease, including the
prompt payment of rent hereunder, is or may become impaired,
thereupon:
(1) The whole balance of rent and other charges, payments, costs, and
expenses herein agreed to be paid by Lessee, or any part thereof, and also all
costs and officers' commissions including watchmen's wages shall be taken to be
due and payable and in arrears as if by the terms and provisions of this lease
said balance of rent and other charges, payment, taxes, costs and expenses were
on that date, payable in advance. Further, if this lease or any part thereof is
assigned, or if the premises, or any part thereof is sub-let, Lessee hereby
irrevocably constitutes and appoints
<PAGE>
Lessor as Lessee's agent to collect the rents due from such assignee or
sub-lessee and apply the same to the rent due hereunder without in any way
affecting Lessee's obligation to pay any unpaid balance of rent due hereunder;
or
(2) At the option of Lessor, this lease and the terms hereby created shall
determine and become absolutely void without any right on the part of Lessee to
reinstate this lease by payment of any sum due or by other performance of any
condition, term, or covenant broken; whereupon, Lessor shall be entitled to
recover damages for such breach in an amount equal to the amount of rent
reserved for the balance of the term of this lease, less the fair rental value
of the said demised premises for the remainder of the lease term.
15. Further Remedies of Lessor
In the event of any default as above set forth in Section 14, Lessor, or
anyone acting on Lessor's behalf, at Lessor's option:
(a) May let said premises or any part or parts thereof to such person or
persons as may, in Lessor's discretion, be best; and Lessee shall be liable for
any loss of rent for the balance of the then current term. Any such re-entry or
re-letting by Lessor under the terms hereof shall be without prejudice to
Lessor's claim for actual damages, and shall under no circumstances, release
Lessee from liability for such damages arising out of the breach of any of the
covenants, terms, and conditions of this lease.
(b) May proceed as a secured party under the provisions of the Uniform
Commercial Code against the goods in which Lessor has been granted a security
interest pursuant to Section 13(g) hereof; and
(c) May have and exercise any and all other rights and/or remedies, granted
or allowed landlords by any existing or future Statute, Act of Assembly, or
other law of this state in cases where a landlord seeks to enforce rights
arising under a lease agreement against a tenant who has defaulted or otherwise
breached the terms of such lease agreement; subject, however, to all of the
rights granted or created by any such Statute, Act of Assembly, or other law of
this state existing for the protection and benefit of tenants; and
(d) May have and exercise any and all other rights and remedies contained
in this lease agreement, including the rights and remedies provided by Sections
16 and 17 hereof.
16. Confession of Judgment for Money
Lessee covenants and agrees that if the rent and/or any charges reserved in
this lease as rent (including all accelerations of rent permissible under the
provisions of this lease) shall remain unpaid five (5) days after the same is
required to be paid, then and in that event, Lessor may cause Judgment to be
entered against Lessee, and for that purpose Lessee hereby authorizes and
empowers Lessor or any Prothonotary, Clerk of Court or Attorney of any Court of
Record to appear for and confess judgment against Lessee and agrees that Lessor
may commence an action pursuant to Pennsylvania Rules of Civil Procedure No.
2950 et seq. for the recovery from Lessee of all rent hereunder (including all
accelerations of rent permissible under the provisions of this lease) and/or for
all charges reserved hereunder as rent, as well as for interest and costs and
Attorney's commission, for which authorization to confess judgment, this lease,
or a true and correct copy thereof, shall be sufficient warrant. Such Judgment
may be confessed against Lessee for the amount of rent in arrears (including all
accelerations of rent permissible under the provisions of this lease) and/or for
all charges reserved hereunder as rent, as well as for interest and costs;
together with an attorney's commission of five percent (5%) of the full amount
of Lessor's claim against Lessee. Neither the right to institute an action
pursuant to Pennsylvania Rules of Civil Procedure No. 2950 et seq. nor the
authority to confess judgment granted herein shall be exhausted by one or more
exercises thereof, but successive complaints may be filed and successive
judgments may be entered for the aforedescribed sums five days or more after
they become due as well as after the expiration of the original term and/or
during or after expiration of any extension or renewal of this lease.
17. Confession of Judgment for Possession of Real Property
Lessee covenants and agrees that if this lease shall be terminated (either
because of condition broken during the term of this lease or any renewal or
extension thereof and/or when the term hereby created or any extension thereof
shall have expired) then, and in that event, Lessor may cause a judgment in
ejectment to be entered against Lessee for possession of the demised premises,
and for that purpose Lessee hereby authorizes and empowers any Prothonotary,
Clerk of Court or Attorney of any Court of Record to appear for Lessee and to
confess judgment against Lessee in Ejectment for possession of the herein
demised premises, and agrees that Lessor may commence an action pursuant to
Pennsylvania Rules of Procedure No. 2970 et seq. for the entry of an order in
Ejectment for the possession of real property, and Lessee further agrees that a
Writ of Possession pursuant thereto may issue forthwith, for which authorization
to confess judgment and for the issuance of a writ or writs of possession
pursuant thereto, this lease, or a true and correct copy thereof, shall be
sufficient warrant. Lessee further covenants and agrees, that if for any reason
whatsoever, after said action shall have commenced the action shall be
terminated and the possession of the premises demised hereunder shall remain in
or be restored to Lessee, Lessor shall have the right upon any subsequent
default or defaults, or upon the termination of this lease as above set forth to
commence successive actions for possession of real property and to cause the
entry of successive judgments by confession in Ejectment for possession of the
premises demised hereunder.
18. Affidavit of Default
In any procedure or action to enter Judgment by Confession for Money
pursuant to Section 16 hereof, or to enter Judgment by Confession in Ejectment
for possession of real property pursuant to Section 17 hereof, if Lessor shall
first cause to be filed in such action an affidavit or averment of the facts
constituting the default or occurrence of the condition precedent, or event, the
happening of which default, occurrence, or event authorizes and empowers Lessor
to cause the entry of judgment by confession, such affidavit or averment shall
be conclusive evidence of such facts, defaults, occurrences, conditions
precedent, or events; and if a true copy of this lease (and of the truth of
which such affidavit or averment shall be sufficient evidence) be filed in such
procedure or action, it shall not be necessary to file the original as a Warrant
of Attorney, any rule of court, custom, or practice to the contrary
notwithstanding.
19. Waivers by Lessee of Errors, Right of Appeal, Stay, Exemption, Inquisition
Lessee hereby releases to Lessor and to any and all attorneys who may
appear for Lessee all errors in any procedure or action to enter Judgment by
Confession by virtue of the warrants of attorney contained in this lease, and
all liability therefor. Lessee further authorizes the Prothonotary or any Clerk
of any Court of Record to issue a Writ of Execution or other process, and
further agrees that real estate may be sold on a Writ of Execution or other
process. If proceedings shall be commenced to recover possession of the demised
premises either at the end of the term or sooner termination of this lease, or
for non-payment of rent or for any other reason, Lessee specifically waives the
right to the three (3) months' notice to quit and/or the fifteen (15) or thirty
(30) days' notice to quit required by the Act of April 6, 1951, P.L. 69, as
amended, and agrees that five (5) days' notice shall be sufficient in either or
any such case.
20. Right of Assignee of Lessor
The right to enter judgment against Lessee by confession and to enforce all
of the other provisions of this lease herein provided for may at the option of
any assignee of this lease, be exercised by any assignee of the Lessor's right,
title and interest in this lease in his, her, or their own name, any statute,
rule of court, custom, or practice to the contrary notwithstanding.
21. Remedies Cumulative
All of the remedies hereinbefore given to Lessor and all rights and
remedies given to it by law and equity shall be cumulative and concurrent. No
determination of this lease or the taking or recovering possession of the
premises shall deprive Lessor of any of its remedies or actions against the
Lessee for rent due at the time or which, under the terms hereof would in the
future become due as if there had been no determination, nor shall the bringing
of any action for rent or breach of covenant, or the resort to any other remedy
herein provided for the recovery of rent be construed as a waiver of the right
to obtain possession of the premises.
22. Condemnation
In the event that the premises demised herein, or any part thereof, is
taken or condemned for a public or quasi-public use, this lease shall, as to the
part so taken, terminate as of the date title shall vest in the condemnor, and
rent shall abate in proportion to the square feet of leased space taken or
condemned or shall cease if the entire premises be so taken. In either event the
Lessee waives all claims against the Lessor by reason of the complete or partial
taking of the demised premises.
23. Subordination
This Agreement of Lease and all its terms, covenants and provisions are and
each of them is subject and subordinate to any lease or other arrangement or
right to possession, under which the Lessor is in Control of the demised
premises, to the rights of the owner or owners of the demised premises and of
the land or buildings of which the demised premises are a part, to all rights of
the Lessor's landlord and to any and all mortgages and other encumbrances now or
hereafter placed upon the demised premises or upon the land and/or the buildings
containing the same; and Lessee expressly agrees that if Lessor's tenancy,
control, or right to possession shall terminate either by expiration, forfeiture
or otherwise, then this lease shall thereupon immediately terminate and the
Lessee shall, thereupon, give immediate possession; and Lessee hereby waives any
and all claims for damages or otherwise by reason of such termination as
aforesaid.
24. Termination of Lease
It is hereby mutually agreed that either party hereto may determine this
lease at the end of said term by giving to the other party written notice
thereof at least sixty days prior thereto, but in default of such notice, this
lease shall continue upon the same terms and conditions in force immediately
prior to the expiration of the term hereof as are herein contained for a further
period of one year and so on from year to year unless or until terminated by
either party hereto, giving the other sixty days written notice for removal
previous to expiration of the then current term; PROVIDED, however, that should
this lease be continued for a further period under the terms hereinabove
mentioned, any allowances given Lessee on the rent during the original term
shall not extend beyond such original term, and further provided, however, that
if Lessor shall have given such written notice prior to the expiration of any
term hereby created, of his intention to change the terms and conditions of this
lease, and Lessee shall not within sixty days from such notice notify Lessor of
Lessee's intention to vacate the demised premises at the end of the then current
term, Lessee shall be considered as Lessee under the terms and conditions
mentioned in such notice for a further term as above provided, or for such
further term as may be stated in such notice. In the event that Lessee shall
give notice, as stipulated in this lease, of intention to vacate the demised
premises at the end of the present term, or any renewal or extension thereof,
and shall fail or refuse so to vacate the same on the date designated by such
notice, then it is expressly agreed that Lessor shall have the option either
(a) to disregard the notice so given as having no effect, in which case all the
terms and conditions of this lease shall continue thereafter with full force
precisely as if such notice had not been given, or (b) Lessor may, at any time
within thirty days after the present term or any renewal or extension thereof,
as aforesaid, give the said Lessee ten days' written notice of his intention to
terminate the said lease; whereupon the lessee expressly agrees to vacate said
premises at the expiration of the said period of ten days specified in said
notice. All powers granted to Lessor by this lease may be exercised and all
obligations imposed upon Lessee by this lease shall be performed by Lessee as
well during any extension of the original term of this lease as during the
original term itself.
25. Notices
All notices must be given by certified mail, return receipt requested.
26. Lease Contains all Agreements
It is expressly understood and agreed by and between the parties hereto
that this lease and the riders attached hereto and forming a part hereof set
forth all the promises, agreements, conditions and understandings between Lessor
or his Agent and Lessee relative to the demised premises, and that there are no
promises, agreements, conditions or understandings, either oral or written,
between them other than herein set forth. It is further understood and agreed
that, except as herein otherwise provided, no subsequent alteration, amendment,
change or addition to this lease shall be binding upon Lessor or Lessee unless
reduced to writing and signed by them.
27. Heirs and Assignees
All rights and liabilities herein given to, or imposed upon, the respective
parties hereto shall extend to and bind the several and respective heirs,
executors, administrators, successors and assigns of said parties; and if there
shall be more than one Lessee, they shall all be bound jointly and severally by
the terms, covenants and agreements herein, and the word "Lessee" shall be
deemed and taken to mean each and every person or party mentioned as a Lessee
herein, be the same one or more; and if there shall be more than one Lessee, any
notice required or permitted by the terms of this lease may be given by or to
any one thereof, and shall have the same force and effect as if given by or to
all thereof. The words "his" and "him" wherever stated herein, shall be deemed
to refer to the "Lessor" or "Lessee" whether such Lessor or Lessee be singular
or plural and irrespective of gender. No rights, however, shall inure to the
benefit of any assignee of Lessee unless the assignment to such assignee has
been approved by Lessor in writing as aforesaid.
28. Security Deposit
Lessee does herewith deposit with Lessor the sum of Dollars,
to be held as security for the full and faithful performance by Lessee of
Lessee's obligations under this Lease and for the payment of damages to the
demised premises. Said security deposit is to be held by Lessor as an Escrow
Fund pursuant to the terms and provisions of the Penna Act of Assembly approved
December 29, 1972, Act No. 363. Except for such sum as shall be lawfully applied
by Lessor to satisfy valid claims against Lessee arising from defaults under
this lease or by reason of damages to the demised premises, the Escrow Fund
shall be returned to Lessee at the expiration of the terms of this lease or any
renewals or extensions thereof but as provided for in the said Act of Assembly.
It is understood that no part of any security deposit or Escrow Fund is to be
considered as the last rental due under the terms of the lease.
29. Headings no part of Lease
Any headings preceding the text of the several paragraphs and
sub-paragraphs hereof are inserted solely for convenience of reference and shall
not constitute a part of this lease nor shall they affect its meaning,
construction or effect.
<PAGE>
30. The lessor agrees that in the event of the death of either partner of the
lessee, or in the event of a sale of the lessee's business, the lessor will
accept from the lessee (6) months notice to terminate the lease. In such event
all rent arreages will be liquidated as part of the distribution of the sales
proceeds.
In Witness Whereof, the parties hereto have executed these presents the day
and year first above written, and intend to be legally bound thereby.
SEALED AND DELIVERED IN THE
PRESENCE OF:
Agent
- ------------------------------ ------------------------------
/s/ Rueben B. Clark IV Seal
- ------------------------------ ------------------------------
/s/ William L. Swann Seal
- ------------------------------ ------------------------------
Seal
- ------------------------------ ------------------------------
Seal
- ------------------------------ ------------------------------
=========
L E A S E
=========
- ---------------------------------
Riddle Valley Industrial Park
- ---------------------------------
TO
Clark Products, Inc.
- ---------------------------------
Premises
- ---------------------------------
- ---------------------------------
Rent 45,000 Annually
- ---------------------------------
Dated November 1, 1996
- ---------------------------------
Term Three Years
- ---------------------------------
- ---------------------------------
=================================
P 51939
FOR VALUE RECEIVED............hereby assign, transfer and set over
unto...........................................................................
Executors, Administrators and assigns all.......................right, title and
interest in the within .........................and all benefit and advantages
to be derived therefrom.
WITNESS.........hand and seal this...........day of.............A.D. 19....
SEALED IN THE PRESENCE OF )
)
) -----------------------------------------
)
)
<PAGE>
Exhibit 10.9
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
dated as of December 20, 1995
by and among
JANNOCK, INC.,
HERITAGE VINYL PRODUCTS INC.
and
THE GSI GROUP, INC. f/k/a GRAIN SYSTEMS, INC.
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Page
<C> <S> <C>
RECITALS.................................................................. 1
ARTICLE I
DEFINITIONS; CLOSING; ENTRY INTO AGREEMENT
1.01. Definitions................................................... 1
1.02. Closing....................................................... 5
1.03. Entry into Agreement.......................................... 5
ARTICLE II
PURCHASE AND SALE
2.01. Transfer of Assets............................................ 5
2.02. Purchase Price................................................ 6
2.03. Instruments of Conveyance..................................... 6
2.04. Assumption of Liabilities..................................... 6
2.05. Adjustment of Purchase Price.................................. 6
2.06. Allocation of Total Consideration............................. 7
2.07. Further Assurances............................................ 7
2.08. Referrals and Deliveries...................................... 8
2.09. Risk of Loss.................................................. 8
2.10. Transfer Taxes, Etc........................................... 8
2.11. Proration of Certain Taxes.................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
3.01. Organization, Standing, and Authority......................... 9
3.02. Seller Subsidiaries........................................... 9
3.03. Authority..................................................... 9
3.04. Financial Statements.......................................... 10
3.05. Absence of Undisclosed Liabilities............................ 10
3.06. [Intentionally Left Blank].................................... 10
3.07. Compliance with Laws; Condemnation............................ 10
3.08. Employee Benefit Plans........................................ 11
3.09. Material Contracts............................................ 12
3.10. Material Contract Defaults.................................... 14
3.11. Legal Proceedings............................................. 14
3.12. Absence of Certain Changes or Events.......................... 14
3.13. [Intentionally Left Blank.]................................... 14
3.14. Properties.................................................... 14
3.15. Intellectual Property......................................... 15
3.16. Insurance..................................................... 15
3.17. Employee Relations............................................ 16
3.18. Filings, Etc.................................................. 17
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
3.19. Consents....................................................... 17
3.20. Indebtedness................................................... 17
3.21. Certain Transactions and Agreements............................ 17
3.22. Adequacy of Assets............................................. 18
3.23. Customers and Suppliers........................................ 18
3.24. Powers-of-Attorney............................................. 18
3.25. Accounts Receivable............................................ 18
3.26. Inventory...................................................... 18
3.27. Warranty and Repair Expense; Product Liability................. 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.01. Organization, Standing, and Authority.......................... 19
4.02. Authority...................................................... 19
4.03. Compliance with Laws; Legal Proceedings; Consents.............. 20
ARTICLE V
COVENANTS OF SELLER
5.01. Restrictions on Competition.................................... 20
5.02. Conduct of Business Prior to Closing........................... 21
5.03. Exclusivity.................................................... 23
5.04. Access......................................................... 23
5.05. Consents....................................................... 23
5.06. Confidentiality................................................ 23
ARTICLE VI
COVENANTS OF BUYER
6.01. Brokers........................................................ 24
6.02. Consents....................................................... 24
6.03. Confidentiality................................................ 24
6.04. Employees; Employee Compensation............................... 25
6.05. Cooperation Concerning Leases.................................. 26
6.06. Cooperation Concerning Customers............................... 26
6.07. Due Diligence Results.......................................... 26
6.08. Cooperation Concerning Retained Liabilities.................... 26
6.09. Closing Requirements........................................... 26
</TABLE>
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ARTICLE VII
CONDITIONS
7.01. Conditions to Buyer's Obligation to Close....................... 27
7.02. Conditions to Seller's Obligation to Close...................... 28
ARTICLE VIII
ENVIRONMENTAL MATTERS
8.01. Environmental Representations and Warranties of Seller.......... 30
8.02. Environmental Covenant of Seller................................ 32
ARTICLE IX
GUARANTY
9.01. Guaranty Provisions............................................. 32
ARTICLE X
TERMINATION
10.01. Termination.................................................... 34
10.02. Effect of Termination.......................................... 35
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.01. Survival....................................................... 35
11.02. Indemnification by Seller...................................... 35
11.03. Indemnification by Buyer....................................... 36
11.04. Indemnification Procedures..................................... 37
11.05. Limitations.................................................... 39
ARTICLE XII
GENERAL PROVISIONS
12.01. Notices........................................................ 40
12.02. Counterparts................................................... 42
12.03. Submission to Jurisdiction; Waiver of Jury Trial............... 42
12.04. Specific Performance, Etc...................................... 42
12.05. Governing Law.................................................. 43
12.06. Expenses....................................................... 43
12.07. Waiver; Amendment.............................................. 43
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12.08. Entire Agreement; No Third-Party Beneficiaries; Etc............ 43
12.09. Assignment..................................................... 43
12.10. Knowledge of Seller............................................ 44
12.11. Announcements.................................................. 44
12.12. Construction................................................... 44
12.13. Limited Joinder................................................ 45
</TABLE>
Schedule 1.01(a) Equipment
Schedule 1.01(b) Molds and Tooling
Schedule 1.01(c) Assigned Contracts
Schedule 1.01(d) Computer Hardware and Software
Schedule 1.01(e) Assumed Liabilities
Schedule 1.01(f) Latest Balance Sheet
Schedule 1.01(g) Leases
Schedule 2.05 Basis of Preparation of Closing Date Balance Sheet
Schedule 2.06 Allocation of Total Consideration
Schedule 3.03(b) Required Appraisals
Schedule 3.04(b) Additional Financial Information
Schedule 3.04(c) Certain Books and Records of Seller
Schedule 3.08(a) Employee Benefit Plans
Schedule 3.08(f) Certain Employee Payments
Schedule 3.08(g) Commitments RE: Employee Benefits Plans
Schedule 3.09 Material Contracts
Schedule 3.11 Legal Proceedings
Schedule 3.12 Material Changes
Schedule 3.14(a) Real Property
Schedule 3.15(a) Intellectual Property Registrations
Schedule 3.15(c) Intellectual Property Matters
Schedule 3.16 Insurance
Schedule 3.17(a) Employee Matters
Schedule 3.18(a) Required Permits
Schedule 3.18(c) Orders
Schedule 3.19 Consents
Schedule 3.20 Indebtedness
Schedule 3.21 Certain Transactions
Schedule 3.23 Customers and Suppliers
Schedule 3.24 Powers-of-Attorney
Schedule 3.27 Text of Product Warranty
Schedule 5.02(a) Planned Capital Expenditures
Schedule 8.01(g) Environmental Assessments
Exhibit A Form of Escrow Agreement
Exhibit B Form of General Warranty Deed
Exhibit C Form of Bill of Sale
Exhibit D Text of Opinion of Counsel for Seller and Owners
Exhibit E Form of Transitional Services Agreement
Exhibit F Text of Opinion of Counsel for Buyer and Parent
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THIS ASSET PURCHASE AGREEMENT, dated as of the 20th December, 1995 (this
"Agreement"), by and among JANNOCK, INC., a Delaware corporation ("Parent"),
HERITAGE VINYL PRODUCTS INC., a Delaware corporation ("Buyer"), and THE GSI
GROUP, INC. f/k/a GRAIN SYSTEMS, INC., a Delaware corporation ("Seller"), and
joined in by LARRY SLOAN, JOHN C. SLOAN, JAMES E. SLOAN and THOMAS G. SLOAN
(collectively the "Owners") for the limited purposes set forth in Section 12.13
hereof.
RECITALS:
A. Buyer desires to acquire, and Seller desires to sell, all the assets of
Seller used primarily in the business of Seller's Heritage Vinyl Products
Division (other than Owners' Real Property, as hereinafter defined) on the terms
and subject to the conditions contained herein.
B. Buyer desires to acquire, and Owners desire to sell, Owners' Real
Property on the terms and subject to the conditions set forth herein;
C. Buyer is a wholly-owned subsidiary of Parent and Parent is willing to
guaranty the obligations of Buyer hereunder as herein provided.
D. Concurrently with the execution and delivery of this Agreement, Seller,
Buyer and Chicago Title Insurance Co. (the "Escrow Agent") shall enter into an
escrow agreement in the form of Exhibit A hereto (the "Escrow Agreement"),
whereby Buyer shall deposit the Escrow Sum (as defined in the Escrow Agreement)
with the Escrow Agent.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS; CLOSING; ENTRY INTO AGREEMENT
1.01. The following terms used herein shall be defined as set forth below:
"Affiliate" of a person shall mean any person controlling, controlled
by or under common control with such person, including, in the case of
Seller, any shareholder of Seller.
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"Assets" shall mean all of the properties, claims, contracts and other
assets (of every kind, nature, character and description, whether real,
personal or mixed, whether tangible or intangible, whether accrued,
contingent or otherwise and wherever situated) of Seller and Owners used
primarily in the Business, other than the Excluded Assets. The Assets shall
include, without limitation, all of the following properties used primarily
in the Business: (i) the land and buildings located in Macon, Mississippi
and more particularly described in Schedule 3.14(a) hereto (the "Real
Estate"), (ii) all production equipment, maintenance equipment and blending
equipment, trucks, trailers, tankers and office equipment, wherever
located, as set forth on Schedule 1.01(a) hereto and all other equipment
which becomes property of Seller in connection with the termination of a
Terminated Lease pursuant to Section 5.02(e) hereof (the "Equipment"),
(iii) all tooling, dies and molds related to extrusion or injection
molding, wherever located, as set forth on Schedule 1.01(b) hereto and all
other tooling, dies and molds which become property of Seller in connection
with the termination of a Terminated Lease pursuant to Section 5.02(e)
hereof (the "Molds and Tooling"), (iv) all books, records, customer lists,
advertising materials, whether in written, video-taped or other forms, and
other documents, wherever located, (v) the patents, trademarks, trade
secrets and other intellectual property set forth on a Schedule 3.15(a)
hereto, (vi) the purchaser orders, contracts and agreements set forth on
Schedule 1.01(c) hereto and all contracts and agreements of Seller related
primarily to the Business which, by virtue of the terms of Section 3.09,
are not required to be disclosed on Schedule 3.09 (the "Assigned
Contracts"), (vii) the inventory, accounts receivable, prepaid expenses and
other current assets of the Business, less any reserve for doubtful
accounts (the "Current Assets"), all calculated in accordance with Schedule
2.05 hereto, (viii) all good will associated with the Business as a going
concern, together with the exclusive right for Buyer to represent itself as
carrying on the Business in continuation of and in succession to Seller,
including the exclusive right to use the name "Heritage Vinyl Products" or
any variation thereof as a part of the name of or in connection with the
Business or any part thereof carried on or to be carried on by Buyer, and
(ix) computer hardware and software used primarily in the Business, as set
forth on Schedule 1.01(d), and the accounting, customer, financial,
engineering, manufacturing and other data and information in other computer
systems of Seller primarily related to the Business; provided, that the
Assets shall not include any of the Excluded Assets. Schedules 1.01(a)
through (d) shall set forth the location of each Asset covered thereby.
"Assumed Liabilities" shall mean only the following liabilities and
obligations of the Business: (i) the accounts
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payable, accrued current liabilities and expenses (including, without
limitation, accrued wages and benefits and accrued warranty expense) and
rebate advance liability to suppliers of the Business as of the Closing
Date (including, without limitation, the Shintech rebate liability) set
forth on the Latest Balance Sheet and all current liabilities and
obligations incurred or accrued by the Business thereafter in the ordinary
course consistent with past practices through and including the Closing
Date (the "Current Liabilities"), (ii) Seller's liabilities and obligations
under the Assigned Contracts, (iii) all of Seller's usual and customary
product replacement and product warranty obligations with respect to the
products of the Business and (iv) the other liabilities, if any, set forth
on Schedule 1.01(e) hereto.
"Business" shall mean all business conducted by the Heritage Vinyl
Products Division of Seller.
"Closing Date" shall mean the date of the Closing contemplated by
Section 1.02 hereof.
"Environmental Assessments" shall mean the Phase I and, if necessary
in the opinion of Buyer, Phase II environmental assessments obtained by
Buyer with respect to the Real Estate.
"Excluded Assets" shall mean (i) cash, cash equivalents or marketable
securities, (ii) computer hardware or software (other than as described in
the definition of "Assets"), including without limitation all Qantel and
CAD/Key hardware and software, with respect to Seller's computer systems
(provided that Buyer shall acquire and there is included in the Assets all
data and information therein which is primarily related to the Business),
(iii) claims, deposits, prepayments, refunds, causes of action, choses in
action, rights of recovery, rights of set off and rights of recoupment with
respect to the Excluded Assets and the Retained Liabilities (as defined in
Section 2.04 hereof) including, without limitation any of the foregoing
relating to taxes, (iv) all insurance policies and any prepaid premiums
with respect thereto, (v) the obligation of any Employee to repay loans
made by Seller to such Employee and (vi) Seller's rights under this
Agreement and related documents.
"Employee" shall mean any employee of Seller who is actively employed
primarily in the conduct of the Business on the Closing Date.
"GAAP" shall mean generally accepted accounting principles as in
effect on the date hereof.
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"Indebtedness" shall mean obligations on account of money borrowed,
bonds, debentures, notes or similar instruments, capitalized leases,
letters of credit or guarantees.
"Latest Balance Sheet" shall mean the combined balance sheet of the
Heritage Vinyl Products Division of The GSI Group, Inc. f/k/a Grain
Systems, Inc. and Macon Improvement as of September 30, 1995, and
Supplemental Information prepared by Seller and attached hereto as Schedule
1.01(f).
"Leases" shall mean the equipment, mold or tooling leases or
agreements in the nature of a lease, which are disclosed on Schedule
1.01(g) hereto.
"Lien" shall mean any mortgage, lien, charge, security interest,
encumbrance or other right of third parties.
"Material Adverse Effect" shall mean a material adverse effect on the
Assets, the business, liabilities or financial condition of the Business,
taken as a whole, or Seller's or Owners' ability to consummate the
transactions contemplated by this Agreement.
"Owners' Real Property" shall mean the land constituting the Real
Estate and all those buildings or portions thereof located on such land as
shall be owned by Owners.
"Permitted Liens" shall mean any of the following liens: (i) statutory
liens for personal property taxes or real estate taxes or assessments not
yet delinquent or payable subsequent to the Closing Date, (ii) statutory or
common law liens securing payment or performance of any obligation of
Seller relating to the Business, the payment or performance of which is not
delinquent, or which are payable or performable subsequent to the Closing
Date or (iii) any easements, rights of way, restrictions, installations or
public utilities, title imperfections and restrictions, reservations in
land patents, zoning ordinances or other similar liens or encumbrances that
do not materially interfere with the use by Seller of the property subject
thereto or affected thereby.
The term "a person" shall mean an individual, corporation, trust,
partnership or other entity.
"Seller's Assets" shall mean all the Assets except Owners' Real
Property.
"Total Consideration" shall mean the sum of (i) the Purchase Price
plus (ii) any amount paid by Buyer pursuant to Section 6.05 to purchase
Assets previously subject to a Terminated Lease plus (iii) the Assumed
Liabilities.
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1.02. Closing. Unless this Agreement is earlier terminated, the closing
of the purchase and sale of the Assets and the Assumption of the Assumed
Liabilities, as contemplated herein (the "Closing"), shall take place on January
11, 1996, at the offices of Sachnoff & Weaver, Ltd., 30 South Wacker Drive,
Chicago, Illinois 60606 at 10:00 a.m., local time, or as soon thereafter as the
conditions set forth in Article VII have been satisfied, upon five days notice
from Seller or Buyer to the other, or such other place and time as the parties
mutually agree.
1.03. Entry into Agreement. On or prior to 5:00 p.m., Eastern time, on
Wednesday, December 20, 1995, Buyer shall deliver to Seller (i) appropriate
evidence that Buyer's and Parent's respective Boards of Directors have
authorized and approved the transaction contemplated herein, including without
limitation, the execution, delivery and performance of this Agreement by Parent
and Buyer, (ii) not less than two (2) original copies of this Agreement executed
by Parent and Buyer and (iii) a check made payable to the Escrow Agent in the
amount of $250,000.00 (the "Earnest Money"). If the foregoing are received by
Seller in a timely manner, Seller shall (i) promptly execute and cause Owners to
execute this Agreement and deliver a fully executed copy back to Buyer, and (ii)
deposit the Earnest Money with the Escrow Agent pursuant to the Escrow
Agreement. In the event that either (A) Seller or any Owner does not execute
and deliver this Agreement to Buyer on or before December 22, 1995 or (B) the
transaction contemplated herein fails to close due to (i) a failure of a
condition precedent to Buyer's obligations as set forth in Section 7.01 hereof
(other than Section 7.01(b) as it pertains to Buyer or Parent) to have been met
on or before January 30, 1996, (ii) a default by Seller in a material obligation
hereunder, which default is not cured within five (5) business days after
written notice thereof is given to Seller by Buyer, or (iii) the termination of
this Agreement by Seller pursuant to Section 10.01(d) hereof, the Earnest Money,
plus all interest earned thereon, if any, shall be returned to Buyer. In all
other events, the Earnest Money and accrued interest thereon shall be delivered
to Seller. Upon the Closing, the Earnest Money will be delivered to Seller in
partial satisfaction of Buyer's obligations hereunder. Seller and Buyer hereby
covenant and agree to direct the Escrow Agent to deliver the Earnest Money plus
interest earned thereon in accordance with the foregoing provisions.
ARTICLE II
PURCHASE AND SALE
2.01. Transfer of Assets. Subject to the terms and conditions of this
Agreement, at the Closing (i) Seller will sell, convey, assign, transfer and
deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller, free
and clear of any
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Liens other than Permitted Liens, the Seller's Assets and (ii) Owners, jointly
and severally, will sell, convey, assign, transfer and deliver to Buyer, and
Buyer shall purchase, acquire and accept from Owners, free and clear of any
Liens other than Permitted Liens, the Owners' Real Property (collectively the
"Acquisition"). Seller shall effect delivery of the Seller's Assets by
delivering them to Buyer's possession where such Assets reside at the locations
of the business in Macon, Mississippi, Sparks, Nevada and Assumption, Illinois.
2.02. Purchase Price. Subject to Section 2.05 below, in consideration for
the Seller's Assets, Buyer will convey to Seller at the Closing the amount of
$13,200,000, payable as follows: (i) the Earnest Money which shall be delivered
by the Escrow Agent at the Closing; and (ii) a wire transfer of immediately
available funds in the amount of $12,950,000 to such banks and accounts thereat
as shall be specified in writing by Seller. In consideration for Owners' Real
Property, Buyer will convey to Owners at the Closing the amount of $1,600,000,
payable by wire transfer to such bank or banks as shall be specified in writing
by Owners to Buyer. Such aggregate amount, as it may be adjusted pursuant to
Section 2.05 hereof, is referred to as the "Purchase Price."
2.03. Instruments of Conveyance. The transfer of the Assets shall be
effected by the delivery (i) by Owners to Buyer of a duly executed general
warranty deed in substantially the form of Exhibit B hereto in the case of the
Owners' Real Property, (ii) by Seller to Buyer of duly executed bills of sale
substantially in the form of Exhibit C hereto in the case of the Seller's Assets
and (iii) by Seller or Owners, as appropriate, of such other instruments of
conveyance, transfer and assignment as shall be necessary in the reasonable
opinion of counsel for the Buyer to vest in Buyer good, valid and marketable
title to the Assets, free and clear of all Liens, other than Permitted Liens
(collectively, the "Transfer Documents").
2.04. Assumption of Liabilities. At the Closing, Buyer shall assume, and
agrees to pay, perform and discharge when due, the Assumed Liabilities. Under
no circumstances shall Buyer assume any liabilities or obligations of Seller,
including any liabilities or obligations associated with or incurred in
connection with the Business, other than the Assumed Liabilities. All such
liabilities and obligations of Seller (the "Retained Liabilities") shall be
retained by Seller.
2.05. Adjustment of Purchase Price. (a) Not later than 60 calendar days
after the Closing Date, Buyer shall deliver to Seller a combined balance sheet
of the Business as of the Closing Date (the "Closing Date Balance Sheet")
prepared by Buyer (which date of such delivery is hereinafter referred to as the
"Delivery Date"). The Closing Date Balance Sheet shall (i) be prepared from the
books and records of the Business, (ii) be based
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upon a physical inventory made on or about the Closing Date, which shall be
performed by Seller and observed by Buyer, (iii) contain the same components as
the Latest Balance Sheet and (iv) be prepared on the basis set forth in Schedule
2.05. The Closing Date Balance Sheet shall be subject to verification by
Seller's accountants not later than 20 business days after the Delivery Date.
Buyer shall give Seller access to all books, records and work papers prepared or
reviewed by Buyer in connection with the preparation of the Closing Date Balance
Sheet. In the event that the Closing Date Net Working Capital (as hereinafter
defined) is less than $3,800,000 (the "Required Net Working Capital"), as agreed
to collectively by Seller's accountants and Buyer not later than 10 business
days after Seller's accountants complete such verification, then subject to
paragraph (b) below not later than 5 business days thereafter, Seller shall pay
to Buyer in cash or other immediately available funds the amount by which the
Required Net Working Capital is in excess of the Closing Date Net Working
Capital. In the event that the Closing Date Net Working Capital is in excess of
the Required Net Working Capital, Buyer shall pay to Seller as aforesaid the
amount of such excess. As used herein, "Closing Date Net Working Capital" means
the Current Assets less Current Liabilities as of the Closing Date, both
containing the same components as the Latest Balance Sheet and prepared on the
basis set forth in Schedule 2.05.
(b) In the event that Seller's accountants and Buyer cannot agree as to the
amount of the Closing Date Net Working Capital within the above-specified time
frame, Seller and Buyer shall select a firm of independent accountants
reasonably acceptable to Seller and Buyer, and such firm shall be responsible
for determining the amount of the Closing Date Net Working Capital for purposes
of this Section 2.05; provided, however, that the amount by which Required Net
Working Capital is different from the Closing Date Net Working Capital which is
not in dispute, if any, shall be paid as set forth above. The cost of such
determination by such other independent accountants shall be borne equally by
Seller and Buyer.
2.06. Allocation of Total Consideration. Buyer, Seller and Owners agree
to allocate the Total Consideration in a manner consistent with Schedule 2.06
hereto. Seller, Owners and Buyer agree that they shall use such allocation for
all business, tax, accounting and other purposes, including the preparation and
filing of IRS Form 8594.
2.07. Further Assurances. (a) Seller and (with respect to Owners' Real
Property) Owners agree that they will, at any time and from time to time, after
the date hereof, upon reasonable request of Buyer, use all reasonable efforts to
do, execute, acknowledge, and deliver or will cause to be done, executed,
acknowledged, and delivered, all such further acts, deeds, assignments,
transfers, conveyances and powers of attorney as may be reasonably required to
evidence or perfect further the sale,
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assignment, transfer, conveyance and delivery of the Assets to Buyer, or to aid
or assist Buyer in reducing to its possession, title to and possession of any
and all of the Assets sold, assigned, transferred, conveyed and delivered
hereby.
(b) Buyer agrees that it will, at any time and from time to time, after the
date hereof, upon reasonable request of Seller, use all reasonable efforts to
do, execute, acknowledge, and deliver or to cause to be done, executed,
acknowledged, and delivered, all such further acts, deeds, assignments,
transfers, conveyances and powers of attorney as may be required to aid or
assist Seller and (with respect to Owners' Real Property) Owners in the sale,
assignment, transfer, conveyance and delivery of the Assets to Buyer and the
assumption by Buyer of the Assumed Liabilities.
2.08. Referrals and Deliveries. Following the Closing, (i) Seller shall
as promptly as is reasonably practicable: (a) deliver to Buyer, in the form
received, with the addition of any required endorsements by Seller, any cash,
checks or other payments received by Seller with respect to the Current Assets
or otherwise directly related to the operations of the Business and included in
the Assets; (b) refer to Buyer any and all inquiries from customers or suppliers
of Seller relating to the Business; and (c) deliver to Buyer all purchase orders
received by Seller relating to the Business and (ii) Buyer shall as promptly as
reasonably practicable deliver to Seller, in the form received, any cash, checks
or other payments received by Buyer constituting or otherwise directly related
to the Excluded Assets.
2.09. Risk of Loss. All risk of loss with respect to the Assets shall
remain with Seller until the Closing Date and shall pass to Buyer only at the
Closing.
2.10. Transfer Taxes, Etc. All real estate transfer taxes and recording
fees and personal property transfer taxes, if any, payable in connection with
the transfer of the Assets shall be paid equally by Seller or Owners, on the one
hand, and Buyer, on the other. All other taxes payable in connection with the
transfer of the Assets and the assumption of the Assumed Liabilities, including
without limitation any taxes payable as a result of a gain upon such transfer
and assumption shall be paid by Seller or the Owners, as appropriate.
2.11. Proration of Certain Taxes. All state and local ad valorem real
property taxes and personal property taxes pertaining to the Assets for the
taxable year for such taxes in which the Closing occurs shall be prorated
between Buyer and Seller or Owners to the Closing Date, based upon the taxes
levied for that taxable year by each applicable taxing body.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer (and acknowledges and
confirms that Buyer is relying on such representations and warranties in
connection with the purchase of the Assets), as follows:
3.01. Organization, Standing, and Authority. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Delaware.
Seller is duly qualified to do business and in good standing in the States of
the United States and foreign jurisdictions where its ownership or leasing of
the Assets or the conduct of the Business requires it to be so qualified except
where the failure to be duly qualified would not have a Material Adverse Effect.
Seller has all necessary corporate power and authority to carry on the Business
as now conducted, to own, lease and operate the Assets, and to execute and
deliver, and to perform its obligations under, this Agreement. Seller has in
effect all federal, state, local and foreign governmental authorizations
necessary for it to own the Assets, to lease the assets covered by the Leases
and to carry on the Business as it is now conducted.
3.02. Seller Subsidiaries. Seller has no subsidiaries which carry on any
aspects of the Business or which provide products or services to or purchase
products or services from the Business.
3.03. Authority. (a) The execution and delivery of this Agreement by
Seller, and the consummation by Seller of the transactions contemplated herein,
have been duly and validly authorized by all necessary corporate action on the
part of Seller. This Agreement represents a valid and legally binding
obligation of Seller and each Owner, enforceable against Seller and each Owner
in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency or other similar laws of general application
affecting the enforcement of creditors' rights or by general principles of
equity limiting the availability of equitable remedies.
(b) Except as set forth on Schedule 3.03(b) hereto, neither the execution
and delivery of this Agreement by Seller or any Owner, nor the consummation by
Seller or any Owner of the transactions contemplated herein, nor compliance by
Seller with any of the provisions hereof, will as of the Closing Date (i)
conflict with or result in a breach of any provision of the articles of
incorporation or bylaws of Seller or (ii) constitute or result in the breach of
any term, condition, or provision of, or give rise to any right of termination,
cancellation, or acceleration with respect to, or result in the creation of any
Lien upon any of the Assets pursuant to, any note, bond, mortgage,
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indenture, license, agreement, lease or other instrument or obligation by which
the Business or any of the Assets may be subject or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Seller or
any Owner in connection with the Business or any of the Assets. Schedule 3.03(b)
hereto lists all approvals, authorizations, filings, registrations and
notifications required to be obtained or made by Seller in connection with the
consummation of the transactions contemplated hereby.
3.04. Financial Statements. Financial Information; Books and Records (a)
The Latest Balance Sheet was prepared from the books and records of the Business
and fairly presents in all material respects the financial position of the
Business except (i) as otherwise disclosed therein, (ii) for those liabilities
for debt obligations of Seller to LaSalle National Bank and The CIT
Group/Equipment Financing, Inc., which persons have related liens on accounts
receivable, inventories and equipment, and (iii) the net book value of property,
plant and equipment should be approximately $250,000 higher due to additions and
deletions to equipment (assets) and to refinements in calculations of
depreciation previously estimated.
(b) The financial information previously provided to Buyer and referred to
in Schedule 3.04(b) was prepared from the books and records of the Seller and is
in all material respects a complete and correct presentation of the information
shown; provided, however, that any financial projections provided by Seller
(while as of their date of preparation represented good faith estimates based on
information available to Seller at the time) contain assumptions relating to
future events which may or may not occur.
(c) The books and records of the Seller described in Schedule 3.04(c) and
the books and records of the Seller from which the Latest Balance Sheet was
prepared and the information referred to in Section 3.04(b) was taken were
prepared in the ordinary course of business of the Seller and accurately reflect
in all material respects all transactions of the Business of the nature required
by applicable accounting requirements and by law to be contained in such books
and records.
3.05. Absence of Undisclosed Liabilities. The Business has no obligation
or liability (contingent or otherwise) that would reasonably be expected to have
a Material Adverse Effect, except as reflected in the Latest Balance Sheet.
3.06. [Intentionally Left Blank]
3.07. Compliance with Laws; Condemnation. (a) Seller:
(i) Is in compliance with all laws, regulations, reporting and
licensing requirements and orders applicable to
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the Business or to the Employees, the breach or violations of which would
have a Material Adverse Effect, and has no reason to believe that any audit
or review by any federal, state, local or foreign regulatory authority
would disclose any non-compliance or violation which would, either
individually or in the aggregate, have a Material Adverse Effect; and
(ii) Has received no notification or communication from any agency or
department of federal, state, local or foreign government or the staff
thereof or from any self-regulatory body (A) asserting that, or commencing
an investigation as to whether, Seller is not in compliance with any of the
statutes, regulations or ordinances which such governmental authority or
self-regulatory body enforces, which, as a result of such noncompliance in
any such instance, would have a Material Adverse Effect, or (B) threatening
to revoke any license, franchise, permit or governmental authorization,
which revocations would have a Material Adverse Effect.
(b) None of the Assets is subject to any governmental decree or order or is
being condemned, expropriated or otherwise taken by any public authority with or
without compensation, or, to Seller's knowledge, that any such condemnation,
expropriation or taking has been proposed.
3.08. Employee Benefit Plans. (a) Schedule 3.08(a) hereto discloses (i)
all "employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended "ERISA"), and any other
formal or informal employee pension, welfare and/or fringe benefit arrangements
or payroll practices, including without limitation, severance pay, sick leave,
vacation pay, salary continuation for disability, compensation, bonus, stock
purchase, hospitalization, medical insurance, life insurance, and scholarship
programs maintained by Seller or to which Seller contributed or is obligated to
contribute thereunder, whether legally binding or not, for the benefit of the
current or former employees of Seller who are or were employed primarily in the
Business ("Employee Benefit Plans"), (ii) all such Employee Benefit Plans which
are also "employee pension benefit plans," as defined in Section 3(2) of ERISA,
and which are subject to Title IV of ERISA, maintained by Seller, or any
corporation, trade or business which is or was under common control with Seller
or treated as a single employer with Seller under Sections 414(b), (c), (m) or
(o) of the Code "ERISA Affiliate") or to which Seller or any ERISA Affiliate
contributed or is obligated to contribute thereunder ("Pension Plans"), and
(iii) any collective bargaining agreements to which Seller is or has been a
party covering any Employees.
(b) The Employee Benefit Plans intended to qualify under Section 401(a) of
the Code have been determined by the Internal Revenue Service to so qualify and
each trust maintained pursuant thereto has been determined to be exempt from
federal
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income taxation under Section 501(a) of the Code (or has been submitted for such
a determination within the applicable remedial amendment period); all
contributions due and owing thereto have been made, and to the knowledge of
Seller nothing has occurred with respect to the operation of the Employee
Benefit Plans which would cause the loss of such qualification or exemption.
(c) True and complete copies of the following documents with respect to
each of the Employee Benefit Plans have been made available to Buyer by Seller:
(i) any plans and amendments thereto, (ii) the last IRS determination letter,
(iii) summary plan descriptions, (iv) written communications to employees
relating to the Employee Benefits Plans and (v) written descriptions of all non-
written agreements, promises or understandings relating to the Employee Benefits
Plans.
(d) The Employee Benefit Plans have been maintained, in all material
respects, in accordance with their terms and with all provisions of ERISA
(including rules and regulations thereunder) and other applicable law, including
without limitation all applicable reporting and disclosure requirements.
(e) Seller maintains no Employee Benefit Plans which are "employee welfare
benefit plans" within the meaning of Section 3(l) of ERISA and which provide for
continuing benefits or coverage for any participant or any beneficiary of a
participant after retirement or other termination of employment, except as may
be required under Part 6 of Subtitle B of Title I of ERISA and at the sole
expense of the participant or the participant's beneficiary. Seller and each of
the ERISA Affiliates which maintains a "group health plan" within the meaning of
Section 5000(b)(1) of the Code has complied in all material respects with the
notice and continuation coverage requirements of Part 6 of Subtitle B of Title I
of ERISA.
(f) Except as disclosed in Schedule 3.08(f) hereto, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will result in any payment becoming due to any Employee of
Seller (including, without limitation, severance pay, unemployment compensation
or similar payment), not including any such payments which may become due in
connection with any actions taken by Buyer after the Closing.
(g) Except as disclosed on Schedule 3.08(g), Seller has no contract, plan,
or commitment, whether legally binding or not, to create any additional Employee
Benefit Plans or to modify any existing Employee Benefit Plan covering any
Employees.
3.09. Material Contracts. Schedule 3.09 hereto lists all agreements,
contracts and commitments of the following types (each a "Material Contract") to
which Seller or any Owner is a
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party or by which Seller or any Owner is bound relating primarily to the
Business or by which any of the Assets is bound:
(a) joint venture, general and limited partnership agreements;
(b) mortgages, indentures, loan or credit agreements, security agreements,
guarantees and other agreements and instruments with any person (including any
affiliate of Seller) relating to the borrowing of money or extension of credit;
(c) contracts containing any covenant not to compete (binding upon or in
favor of Seller) or any covenant relating to the disclosure by Seller of
proprietary information;
(d) contracts or letters of intent (other than between Parent and Seller)
relating to the acquisition or disposition of the Assets or the Business;
(e) material contracts with brokers, dealers, distributors, sales
representatives, original equipment manufacturers, value added remarketers and
agents;
(f) contracts with respect to services provided by any affiliate of Seller
to the Business;
(g) license agreements (as licensor or licensee) which are currently in
effect or which were in effect during the 12 months prior to the date of this
Agreement;
(h) any employment, consulting, retirement or severance agreements, and any
other contracts with Employees or with officers, directors or shareholders which
are binding on or affect the Business or the Assets;
(i) any contract or agreement obligating Seller to advance funds to any
party by loan or capital contribution;
(j) all cash disbursements from December 1, 1994 through November 30, 1995
in excess of $10,000 and any single sale to a customer of the Business in excess
of $10,000 from December 1, 1994 through November 30, 1995;
(k) any franchise agreements;
(l) any contract or agreement with a local, state, federal or foreign
government, or any bureau, agency or other division thereof;
(m) any leases of production equipment, trucks, trailers, tankers, office
equipment, tooling, dies or molds, including all Leases; and
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(n) other agreements, contracts and commitments which individually have a
value of $25,000 or more.
No officer or other Employee of the Business is a party or subject to any
contract with Seller, or to the knowledge of Seller, any other person limiting
his or her freedom to compete with the Seller or such other person in the
performance of duties for Buyer following the Acquisition.
3.10. Material Contract Defaults. Neither Seller nor any Owner is in
default under any Material Contract and there has not occurred any event that,
with the lapse of time or the giving of notice or both, would constitute such a
default. To the knowledge of Seller, no other party to any Material Contract is
in material default thereunder.
3.11. Legal Proceedings. Except as disclosed in Schedule 3.11 hereto,
there are no legal, administrative or arbitration actions, suits or proceedings
instituted or pending or, to the best knowledge of Seller, threatened against
Seller or any Owner relating to the Business or affecting the Assets, or right
of Seller or any Owner to convey the Assets to Buyer, that would have, either
individually or in the aggregate, a Material Adverse Effect.
3.12. Absence of Certain Changes or Events. Except as disclosed in
Schedule 3.12 hereto, Seller has not suffered since September 30, 1995 any
change or event having, or which may reasonably be expected to have, a Material
Adverse Effect, or failed to operate the Business consistent with its past
practices in all material respects.
3.13. [Intentionally Left Blank.]
3.14. Properties.
(a) Real Property. Except for the portion of Seller's offices in
Assumption, Illinois occupied by the Business and the leased facility in Sparks,
Nevada, the Real Estate constitutes the only real property or interest therein
used or useful in the Business. Schedule 3.14(a) hereto sets forth a complete
and correct description of the Real Estate. The Real Estate includes all
material easements and rights of way necessary for access to and use, as
currently utilized or as currently contemplated by Seller to be utilized, of the
Real Estate.
(b) Title. Seller has, or in the case of Owners' Real Property the
Owners have, or as of the Closing will have good and marketable title, free and
clear of any Liens other then Permitted Liens, to the Real Estate and to all of
the other Assets reflected in the Latest Balance Sheet as being owned by it, and
to all Assets acquired by it since the Latest Balance Sheet date, including
without limitation all the Equipment, Molds and Tooling
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and Current Assets, except such Assets as have been disposed of in the ordinary
course of business consistent with past practice.
3.15. Intellectual Property. (a) Except as set forth in Schedule 3.15(a)
hereto and except for the Excluded Assets, Seller owns (or possesses adequate
licenses or other rights to use, which can be transferred to Buyer), free and
clear of any claims of others, all patents, patent applications, trademarks,
service marks (whether registered or unregistered), trademark applications,
service mark applications, trade names, copyrights, copyright applications,
software programs (exclusive of common commercially available software) and
other proprietary rights and all inventions, processes, formulae, and other
technical know-how necessary to own and operate the Assets and to carry on the
Business as currently conducted (collectively, the "Intellectual Property"). A
complete list of the registered Intellectual Property and the common law marks
and trade names constituting Intellectual Property in use currently in the
Business is set forth in Schedule 3.15(a) hereto. Schedule 3.15(a) hereto lists
all licenses and other rights which have been granted by Seller for the use of,
and all Liens on, any Intellectual Property by any third parties.
(b) To the knowledge of Seller, Seller owns or licenses all computer
software developed or currently used by it which is material to the conduct of
the Business and has the right to use (and, to the extent constituting an Asset,
to transfer to Buyer) such software without infringing upon the intellectual
property rights (including trade secrets rights) of a third party.
(c) Schedule 3.15(c) hereto sets forth a complete list of all patents,
trademarks and copyrights included in the Intellectual Property which have been
duly registered in, filed in or issued by the United States Patent and Trademark
Office, the United States Registrar of Copyrights or the corresponding offices
of other countries, and all such registered Intellectual Property has been
properly maintained and renewed in accordance with all applicable laws and
regulations. Except as disclosed in Schedule 3.15(c) hereto, Seller is not
aware of any infringement of any Intellectual Property by any third party.
Seller is conveying to Buyer as part of the Assets all rights to enforce and
protect the Intellectual Property. Seller is not aware of any loss,
cancellation, termination or expiration of any Intellectual Property except as
disclosed in Schedule 3.15(c).
(d) To Seller's knowledge, no present or former employee of Seller has
asserted any claim against Seller with respect to the Intellectual Property.
3.16. Insurance. Schedule 3.16 hereto sets forth the types of product
liability insurance maintained by Seller with regard to the Business, including
the amount of each such coverage, the amount of the deductible with respect
thereto,
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whether or not such coverage is maintained on a "claims made" or "occurrence"
basis and the insurance company providing each such coverage. True and correct
copies of all such insurance policies have been made available to Buyer. Seller
has not received any notice of default under or cancellation of any such
policies. All premiums due thereon covering all periods up to and including the
Closing Date shall have been paid.
3.17. Employee Relations.
(a) Employees. Set forth in Schedule 3.17(a) hereto is a list of all
Employees, and all independent contractors, agents, sales representatives and
persons receiving commissions from Seller in respect of the Business (listed
separately by location) who received from Seller for the year ended December 31,
1994 or who will be receiving from Seller for the year ended December 31, 1995 a
Form 1099, together with their respective rates of compensation during the
previous fiscal year and currently. Except as disclosed in Schedule 3.17(a)
hereto, no Employee or former employee of Seller involved primarily in the
Business has any claim against Seller (whether under federal or state law, under
any employee agreement or otherwise) on account of or for (i) overtime pay in
excess of $10,000, other than overtime pay for the payroll period ending on or
after the Closing Date, (ii) wages or salaries other than for pay periods
commencing after the date of the Latest Balance Sheet, (iii) vacations, time off
or pay in lieu of vacation or time off in excess of 160 hours per employee,
other than vacation or time off (or pay in lieu thereof) earned with respect to
the current fiscal year, (iv) severance or other termination payments, or (v)
benefits, other than pursuant to a Plan described in Schedule 3.08(a) hereto.
Seller has no reason to believe that any former employer of any Employee is
contemplating remedial action of any nature based upon the Employee having
terminated employment with such former employer and having become an Employee.
(b) Collective Bargaining Agreements. There are no labor or collective
bargaining agreements, contracts or understandings with a labor union or labor
organization which are binding upon Seller nor, to Seller's knowledge, is there
any activity involving any Employees seeking to certify a collective bargaining
unit or engaging in any other union organizational activity.
(c) Labor Disagreements. Within the last five years the Business has not
experienced any labor disputes or any stoppages due to labor disagreements.
Seller has not received a notice that there is any unfair labor practice charge
or complaint against Seller pending or, to Seller's knowledge, threatened before
the National Labor Relations Board or any comparable state agency or authority
relating to the Business. There is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending or, to Seller's knowledge,
threatened against or
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affecting the Business. No material grievance is pending or, to Seller's
knowledge, threatened. There has been no "mass layoff" or "plant closing" as
defined by WARN with respect to the Business within the six months prior to the
date hereof and Seller has complied with respect to the Business in all material
respects with applicable provisions of the Immigration Reform and Control Act of
1986.
3.18. Filings, Etc. (a) To Seller's knowledge, Seller has all permits,
licenses, certificates of authority, orders and approvals of, has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies, and self-regulatory bodies that are required
(including by the rules of any self-regulatory body) in order to permit Seller
to carry on the Business as presently conducted (collectively "Required
Permits"), and such Required Permits are in full force and effect. The conduct
of the Business does not violate or infringe any applicable federal, state,
local or foreign law, statute, ordinance, license, rule or regulation including
those of the self-regulatory bodies. To Seller's knowledge, Schedule 3.18(a)
contains a list of all Required Permits.
(b) There are no proceedings pending or, to the knowledge of Seller,
threatened that is reasonably likely to result in the revocation, cancellation
or suspension, or any adverse modification, of any Required Permit and the
execution and delivery of this Agreement and the consummation of any
transactions contemplated hereby will not result in any such revocation,
cancellation, suspension or modification.
(c) Except as set forth in Schedule 3.18(c) hereto, neither Seller nor any
officer, director or employee thereof, is a party or subject to any order,
judgment or decree (other than exemptive orders) relating to the Business with
or by any federal, state, local or foreign regulatory authority.
3.19. Consents. Set forth in Schedule 3.03(b) hereto is a list of all
governmental and third party consents and approvals necessary to be obtained by
Seller or the Owners in order to consummate the transactions contemplated
hereby, including without limitation third-party consents to assignment of any
agreements or licenses, including the Leases (collectively, the "Required
Consents").
3.20. Indebtedness. Except as set forth in Schedule 3.20 hereto, neither
Seller nor any Owner is liable for any Indebtedness which is secured by a Lien
upon or otherwise prohibits the sale of any Assets.
3.21. Certain Transactions and Agreements. To the knowledge of Seller, no
person who is an officer, director or other Affiliate of Seller, or a member of
any officer's,
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director's or other Affiliate's immediate family, has any direct or indirect
interest in any entity that competes with the Business (except with respect to
any interest in less than 1% of the outstanding voting shares of any corporation
whose stock is publicly traded). Except as listed in Schedule 3.21 hereto, no
person who is an officer or director of Seller, or a member of any officer's or
director's immediate family, is directly or indirectly interested in any
material contract or informal arrangement with Seller relating to or affecting
the Business, except for compensation for services as an officer, director or
employee of Seller. Except as listed in Schedule 3.21 hereto, no person who is
an officer or director of Seller, or a member of any officer's or director's
immediate family, has any interest in any property, real or personal, tangible
or intangible, including without limitation inventions, patents, copyrights,
trademarks, trade names or trade secrets or other Assets, used in the Business,
except for normal rights of a shareholder.
3.22. Adequacy of Assets. Except for the Excluded Assets and except for
assets and services to be provided pursuant to the Transitional Services
Agreement, the Assets include all property and assets reasonably necessary for
Buyer to continue the Business after the Closing in the manner that Seller is
conducting the Business prior to the Closing.
3.23. Customers and Suppliers. Schedule 3.23 hereto identifies each of
the customers and suppliers of the Business whose purchases from or sales to the
Business constituted five percent (5%) or more of the combined net sales or net
purchases, respectively, of the Business during the current fiscal year or the
most recently concluded fiscal year.
3.24. Powers-of-Attorney. Except as set forth in Schedule 3.24 hereto, no
person is currently authorized to exercise a power-of-attorney, or to act as
attorney-in-fact, with respect to the Business.
3.25. Accounts Receivable. All accounts receivable of Seller included in
the Current Assets of Seller (i) represent bona fide claims against debtors for
sales, services rendered or other charges arising before the Closing Date, (ii)
are not subject to any material defenses, counterclaims or rights of setoff,
other than cash discounts, returns and allowances and credits for freight
granted in the ordinary course of business, which are reflected in the Closing
Date Balance Sheet and (iii) except to the extent of reserves for doubtful
accounts reflected in the Closing Date Balance Sheet, are fully collectible in
the ordinary course of business.
3.26. Inventory. The inventory of Seller included in the Current Assets
is in all material respects of a quality and quantity usable or salable in the
ordinary course of business as heretofore conducted.
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3.27. Warranty and Repair Expense; Product Liability. The expense incurred
by Seller to satisfy warranty claims in respect of the Business has not exceeded
$250,000 in each of the past two fiscal years. Schedule 3.27 sets forth the
product warranties issued by the Business. Except as set forth on Schedule
3.27, since the end of the most recent fiscal year Seller has not incurred any
material increase in such warranty expense or made any material change in its
warranty practices or policies in respect of the Business. Except as set forth
in Schedule 3.27, there has never been a product liability claim asserted
against Seller's insurance company or a product liability lawsuit filed against
Seller with respect to any products of the Business manufactured or sold by
Seller. Seller is not aware of, and has not received any notice from any
customer or any other party alleging, any material defect in the design or
workmanship of any such products.
Buyer acknowledges that Seller has not made any representation or warranty,
express or implied, in this Agreement or otherwise as to the condition of the
Equipment or its fitness for a particular purpose.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer hereby, jointly and severally, represent and warrant to
Seller with respect to each of Parent and Buyer (and each acknowledges and
confirms that Seller is relying on such representations and warranties in
connection with the sale of the Assets) as follows:
4.01. Organization, Standing, and Authority. It is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. It has all necessary corporate power and authority to carry on its
business as now conducted, to own, lease and operate its assets, properties and
business, and to execute and deliver, and to perform its obligations under, this
Agreement. It has in effect all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now conducted.
4.02. Authority. (a) The execution and delivery of this Agreement by it,
and the consummation by it of the transactions contemplated herein, have been
duly and validly authorized by all necessary corporate and shareholder action on
its part. This Agreement represents a valid and legally binding obligation of
it, enforceable against it in accordance with the terms thereof, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other similar
laws of general application affecting the enforcement of creditors' rights or by
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general principles of equity limiting the availability of equitable remedies.
(b) Neither the execution and delivery of this Agreement by it, nor the
consummation by it of the transactions contemplated herein, nor compliance by it
with any of the provisions hereof, will (i) conflict with or result in a breach
of any provision of its certificate of incorporation or bylaws or (ii)
constitute or result in the breach of any term, condition, or provision of, or
constitute a default or give rise to any additional liability of it under, or
give rise to any right of termination, cancellation, or acceleration with
respect to, or result in the creation of any Lien upon any of its property or
assets pursuant to, any note, bond, mortgage, indenture, license, agreement,
lease or other instrument or obligation to which it is a party or by which or
its properties or assets may be subject. Except for filing and approval under
the HSR Act and other Required Consents, no approvals, authorizations, filings,
registrations and notifications are required to be obtained or made by it in
connection with the consummation of the transactions contemplated hereby.
Consummation of the transactions contemplated hereby will not violate any order,
writ, injunction, decree, statute, rule or regulation applicable to it or any of
its properties or assets.
4.03. Compliance with Laws; Legal Proceedings; Consents. It (i) as not
failed to comply with any applicable law, regulation, reporting or licensing
requirement or orders; (ii) is not subject to any legal, administrative or
arbitration action, suit or proceeding instituted or pending or, to its
knowledge threatened (or unasserted but considered probable of assertion and
which would have at least a more than remote possibility of an unfavorable
outcome) against it or affecting any property, asset, interest or right of it;
or (iii) shall not have failed to obtain by the Closing Date any governmental or
third party consent and approval necessary to be obtained, in each case where
such failure or such action, suit or proceeding could reasonably be expected to
adversely affect its ability to carry out, or its performance of, its
obligations under this Agreement.
ARTICLE V
COVENANTS OF SELLER
5.01. Restrictions on Competition. Seller and each Owner agrees that for
a period of five years following the Closing Date, neither Seller nor any Owner
nor any Affiliate of Seller or any Owner shall (i) manufacture, sell or service
anywhere that Seller has done business any time during the last two years prior
to the Closing Date any products currently manufactured or sold by the Business,
including without limitation vinyl fencing, vinyl yard furniture, vinyl
landscape material and resin compound
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provided, however, that with respect to resin compound the limitation set forth
in this clause (i) shall apply only for two years following the Closing Date and
shall apply only to a geographical area representing those portions of the
United States located within 500 miles of Macon, Mississippi and, in addition,
to sales outside such area to current customers of the Business to whom Seller
has sold resin compound at any time during the last two years prior to the
Closing Date or (ii) solicit or induce, or attempt to solicit or induce, any
Employee hired by Buyer to leave Buyer's employment for any reason whatsoever,
or hire or attempt to hire any other employee of Buyer, in each case whether
directly or indirectly, as principal or agent.
5.02. Conduct of Business Prior to Closing. Unless otherwise consented to
in writing by Buyer (which consent will not be unreasonably withheld,
conditioned or delayed), from the date hereof until the Closing (or earlier
termination hereof):
(a) Seller will carry on the Business in all material respects in the same
manner as heretofore conducted. Seller will use, operate, maintain and repair
the Assets in a normal business manner and in the ordinary course of business in
all material respects (including without limitation making any planned capital
expenditures set forth in Schedule 5.02(a)). Seller will not institute any
material changes in the Business or in the methods of management or operation of
the Business or the Assets.
(b) Seller will take such action as may be reasonably necessary to
maintain, preserve, renew and keep in full force and effect the existence, all
material rights and franchises of the Business and to preserve the business
organization and goodwill of the Business intact in all material respects, to
keep available to Buyer the Employees, and to preserve for Buyer the present
relationships with suppliers, customers and others having business relationships
with Seller.
(c) Seller shall not sell, transfer, pledge, mortgage, encumber or
otherwise dispose of any Assets other than termination of the Terminated Leases
and/or sales of inventory made in the ordinary course of business.
(d) Seller shall not purchase or lease or enter into any agreement to
purchase or lease property or equipment for the Business other than purchases in
the ordinary course of business (and all such property or equipment so purchased
shall become an Asset).
(e) Seller will not do or omit to do any act or permit any act or omission
to act by any Owner or other Affiliate of Seller which would cause a breach of
any material contract, commitment or obligation of Seller or any Owner related
to the Business or any breach of any representation, warranty, covenant
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or agreement made by Seller or any Owner herein. Seller will not renew,
terminate or modify any material lease, license, permit, contract or other
agreement to which it is a party related to the Business except that with
respect to each Lease Seller will cooperate in good faith with Buyer, including
carrying out Buyer's reasonable requests, in negotiating arrangements with each
lessor thereunder (each a "Lessor") pursuant to which Seller will on or before
the Closing Date terminate the rights and obligations of Seller under such Lease
(a "Terminated Lease") and (upon payment by Buyer on the Closing Date pursuant
to Section 6.05) acquire from the Lessor title to the personal property covered
thereby, whereupon such personal property shall become an Asset; provided,
however, that if, after good faith efforts, Seller is unable to effect
termination of any such lease on or before the Closing Date, Buyer shall assume
the obligations of Seller under those of such leases(s), provided the terms and
conditions of which are reasonably satisfactory to Buyer.
(f) Seller will not make any loan or advance (other than advances to
Employees in the ordinary course of business for travel and expense
disbursements in accordance with past practice) to any person. Seller shall not
enter into or modify any employment, severance, termination, collective
bargaining or similar agreement with, or grant any bonuses, salary increases,
severance or termination pay to, any officer, director, consultant or employee
of the Business, except for payments under any existing bonus programs disclosed
to Buyer made in the ordinary course of business. Seller shall not hire or
rehire (or become obligated to hire or rehire) any new or additional officers or
employees of the Business, except for the replacement of hourly employees who
leave the employment of Seller.
(g) Except as contemplated by Schedule 2.05, Seller will not change any
method or principle of accounting with respect to the Business.
(h) Seller shall not settle any claim, litigation or action, whether now
pending or hereafter made or brought, that would have a Material Adverse Effect
on the Business.
(i) Seller shall assume all responsibility for employing any broker or
finder or incurring any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees in connection with this Agreement or the
transactions contemplated hereby which fees and commissions are asserted by any
person claiming to have been engaged by Seller, and in no event shall Buyer or
Parent be required to assume any responsibility therefor.
5.03. Exclusivity. Unless this Agreement is terminated pursuant to
Section 10.01 hereof, neither Seller, nor any subsidiary, Affiliate, director,
officer, employee, representative, agent or shareholder of Seller, shall,
directly or
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indirectly (i) solicit or initiate or enter into discussions or transactions
with, or provide any information to, any person, entity or group (other than
Buyer, Parent and their representatives or Seller's advisors and
representatives) concerning any recapitalization, merger, consolidation or other
business combination or sale of securities or sale of substantial assets or any
similar transaction involving directly or indirectly the Assets or the Business
(any of the foregoing, a "Competing Transaction"), or (ii) participate in any
negotiations regarding, furnish to any other person any information with respect
to, or otherwise cooperate, assist or participate in, any effort or attempt by
any third party to propose or effect any Competing Transaction.
5.04. Access. From the date hereof until the Closing Date (or the earlier
termination of), subject to Section 6.03, at reasonable times and upon
reasonable advance notice, Seller will permit Buyer and its counsel,
accountants, financing sources and other representatives reasonable full access
during normal business hours to all of the plants, properties, equipment, books,
contracts, commitments and records of or relating to the Business and will
furnish Buyer and its representatives during such period with all such
information concerning the Business as Buyer or its representatives may
reasonably request.
5.05. Closing Requirements. Seller and (with respect to Owners' Real
Property) Owners shall take, or cause to be taken, all commercially reasonable
action, and shall do, or cause to be done, all commercially reasonable things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement as promptly as practicable, including, without limitation, under
the Hart-Scott-Rodino Antitrust Improvements Act (the "HSR Act") and all other
applicable federal, state, local and foreign laws and regulations, and
including, without limitation, except as provided in Section 5.02(e) hereof with
respect to Leases, actions necessary to obtain the Required Consents.
5.06. Confidentiality. Seller hereby covenants and agrees that after the
Closing Date neither it nor any of its officers, directors, Affiliates,
shareholders, agents or representatives will disclose to any person of any
Confidential Information, as defined below, concerning the Business (other than
pursuant to a court order or subpoena or as otherwise required by law), except
to authorized representatives of Buyer. For the purposes of this Section 5.06
and Section 6.03, the term "Confidential Information" shall mean ideas,
suggestions, inventions and work relating in any way to the Business which may
be subject to protection under applicable laws respecting intellectual property
rights, designs, discoveries, and improvements and also all information, whether
or not in written or printed form, not generally known in the trade or industry
related to the Business or affairs, manufacturing procedures, methods,
equipment, compositions, technology, know-how, research
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and development programs, sales methods, customer lists, mailing lists, customer
usages and requirements, computer programs, other confidential technical or
business information and data.
ARTICLE VI
COVENANTS OF BUYER
6.01. Brokers. Buyer shall assume all responsibility for employing any
broker or finder or incurring any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees in connection with this Agreement
or the transactions contemplated hereby that are asserted by any person claiming
to have been engaged by Buyer or Parent, and in no event shall Seller be
required to assume any responsibility therefor.
6.02. Consents. Buyer will exercise commercially reasonable efforts to
obtain, prior to the Closing Date, all consents and approvals necessary to be
obtained by Buyer for the consummation of the transactions contemplated hereby.
6.03. Confidentiality. Buyer and Parent each hereby covenants and agrees
that from the date hereof until the Closing Date or earlier termination of this
Agreement in accordance with Section 10.01 hereof, and thereafter if the Closing
Date does not occur, neither it nor any of its officers, directors, affiliates,
shareholders, agents or representatives will disclose or permit the disclosure
to any person of any Confidential Information concerning the Business (other
than pursuant to a court order or subpoena or as otherwise required by law or
regulation or to any professional advisors engaged or desired to be engaged by
Buyer which advisors reasonably request or require such Confidential
Information, provided that any such party to whom such disclosure is made is
informed of such confidentiality obligation and agrees to abide by it), except
to authorized representatives of Seller. If this Agreement is terminated, Buyer
agrees upon request from Seller to return or cause to be returned all such
information provided to Buyer or its representatives, and destroy all summaries,
notes, copies thereof, in written or electronic media, within five (5) days
after the date of such request; provided, however, that if Buyer reasonably
determines that this Agreement may be the subject of litigation Buyer may,
following prior notice to Seller, retain and turn over to counsel for Buyer to
be held by such counsel copies of such portions of such information as Buyer
reasonably determines is necessary or desirable to assist Buyer in connection
with such litigation. Buyer's counsel shall retain such information solely for
use in connection with such litigation and Buyer shall cause its counsel to use
it for no other purpose and promptly to return it to Seller upon termination of
such litigation or the threat thereof.
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6.04. Employees; Employee Compensation. (a) In connection with the
Closing, Buyer shall extend offers of employment (except in the case of David
Lawrence and Marc Board to whom the Buyer may offer employment at the Buyer's
option) to all Employees who shall pass Buyer's normal tests, which offers shall
be (i) with respect to wages, upon the terms presently in effect for such
Employees and (ii) with respect to benefits, upon terms similar to the terms
available to other employees of Parent and its subsidiaries similarly situated.
All offers of employment shall be for employment in Macon, Mississippi.
(b) Seller shall permit Buyer, at the request and expense of Buyer, during
such period ending three business days before the Closing Date as Buyer and
Seller shall agree upon, to use the facilities of Seller during normal business
hours to offer to administer to all Employees of Seller who shall desire to be
employed by Buyer, using such testing service as Buyer shall determine, such
tests as Buyer shall determine.
(c) Seller shall retain liability for severance pay and similar
obligations, if any, payable to Employees relating to termination of any
Employee's employment up through the Closing (including any Employee to whom
Buyer is not required to offer employment pursuant to paragraph (a) above or who
does not accept Buyer's offer).
(d) Buyer shall be responsible for the health care continuation
requirements of all Employees whom Buyer employs and Seller shall be responsible
for all such requirements for all Employees whom Buyer does not employ and for
all former employees of the Seller who worked in the Business, such continuation
to be made in accordance with the continuation coverage requirements of Part 6
of Subtitle B of Title I of ERISA and Section 4980B of the Code. Except as
expressly provided in this paragraph (d), Buyer is not assuming any obligation
of Seller under any Employee Benefit Plan or under ERISA.
(e) For purposes of crediting periods of service for eligibility, vesting
and benefit accrual under any Buyer employee benefit plan, all Employees whom
Buyer employs shall be given credit for prior service with Seller and its ERISA
Affiliates.
(f) Nothing contained in this Agreement shall confer upon any Employee any
right with respect to continued employment by Seller or Buyer. No provision of
this Agreement shall create any third party rights in any Employee, or any
beneficiary or dependent thereof, with respect to the compensation, terms and
conditions of employment that may be provided to such Employee by Buyer or under
any benefit plan that Buyer may maintain.
6.05. Cooperation Concerning Leases. Buyer shall cooperate with Seller in
negotiating with each Lessor in order that each Lease shall become a Terminated
Lease and shall make
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such payments to each Lessor (in excess of the periodic rental payments due
under the Leases prior to the Closing Date, and any late payment penalties or
similar amounts due in connection therewith, which shall continue to be Retained
Liabilities) as shall be reasonable and necessary to cause any such Lease to
become a Terminated Lease; provided that the aggregate amount that Buyer shall
be required to pay on the Closing Date pursuant to this Section 6.05 to Lessors
to permit the termination of the Terminated Leases and the acquisition of the
Assets covered thereby, inclusive of any and all "buy-out" amounts, shall not
exceed $4,140,000; provided, however, that this amount shall be reduced by the
buy-out amount set forth opposite such Lease on Schedule 6.05 hereto for any
such Leases that are assigned to and assumed by Buyer pursuant to Section
5.02(e) hereof (the "Final Buy-Out Amount"). Seller may, at its sole election,
but shall not be obligated to, pay any "buy-out" amount in excess of the Final
Buy-Out Amount in order to facilitate the Closing of the Acquisition.
6.06. Cooperation Concerning Customers. Buyer will take all commercially
reasonable actions which Buyer and Seller shall agree upon to assist Seller in
retaining the customers and good will of the Business during the period prior to
the Closing.
6.07. Due Diligence Results. As soon as reasonably practicable following
the time that Buyer has knowledge of any information which Buyer determines may
result in the conditions set forth in paragraphs (c), (d), (i) or (k) of Section
7.01 hereof not being met, Buyer shall promptly inform Seller orally and confirm
such oral advice in writing. Without limiting the foregoing, Buyer shall
provide Seller with copies of the Title Report, Survey and Environmental
Assessments as promptly as reasonably practicable following the receipt thereof
by Buyer.
6.08. Cooperation Concerning Retained Liabilities. Following the Closing,
Buyer will, at the request and at the expense of Seller, use commercially
reasonable efforts to cooperate with Seller in connection with Seller's payment
and performance of the Retained Liabilities. Without limiting the foregoing,
but subject to Section 5.06 hereof, upon reasonable prior written notice and
during normal business hours, Buyer will make available to Seller the books and
records of the Business relating to the operation thereof prior to the Closing
Date.
6.09. Closing Requirements. Buyer shall take, or cause to be taken, all
commercially reasonable action necessary, proper or advisable to be taken by
Buyer to consummate the transactions contemplated by this Agreement as promptly
as practicable.
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ARTICLE VII
CONDITIONS
The obligations of the parties to close the transaction contemplated by
this Agreement are subject to the fulfillment, prior to or at the Closing unless
otherwise required below, of each of the following conditions:
7.01. Conditions to Buyer's Obligation to Close. The obligation of
Buyer to close is subject to the fulfillment (either by satisfaction or by
written waiver by Buyer, on or before the Closing Date) of the following
conditions:
(a) Regulatory Approvals. The transactions contemplated by this Agreement
shall have been approved by any federal, state, local and foreign governmental
or regulatory authority or self-regulatory body the approval of which is
required to permit consummation thereof; and all waiting periods arising under
the HSR Act or any other applicable federal, state, local or foreign law shall
have duly lapsed or been terminated.
(b) No Orders. Neither Seller, any Owners, Buyer nor Parent shall be
subject to any order, decree or injunction of a court or agency of competent
jurisdiction which either enjoins or prohibits the consummation of any of the
transactions contemplated by this Agreement.
(c) Representations and Warranties. The representations and warranties of
Seller set forth or referred to in this Agreement shall be true and correct in
all material respects as of the Closing Date, except (i) for any such
representations and warranties made as of a specified date, which shall be true
and correct in all material respects as of such date, (ii) as expressly
contemplated or permitted by this Agreement and (iii) inaccuracies that have
been waived in writing by Buyer.
(d) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Seller to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby shall have been duly
performed and complied with by it in all material respects.
(e) Certificates. Seller shall have delivered to Buyer a certificate,
dated as of the Closing Date and signed on its behalf by its chief executive
officer and its chief financial officer (in their capacities as such and not
individually), to the effect that the conditions of its obligations set forth in
subsections (c) and (d) of this Section 7.01 with respect to it have been
satisfied.
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(f) Legal opinion. Buyer shall have received a written opinion, dated the
Closing Date, from counsel for Seller and Owners in substantially the form of
Exhibit D hereto.
(g) Secretary's Certificate. Buyer shall have received a certificate dated
the Closing Date from the Secretary of Seller (in his capacity as such and not
individually) as to articles of incorporation, bylaws, incumbency and
resolutions by the board of directors of Seller.
(h) Consents and Approvals. Seller shall have obtained, and provided Buyer
with executed copies of, all material third party consents and approvals
necessary to be obtained in order to consummate the transactions contemplated
hereby and to permit the assignment or assumption of all Assigned Contracts and
the termination of the Terminated Leases and the acquisition of the Assets
covered thereby.
(i) No Material Adverse Change. There shall not have occurred any Material
Adverse Change.
(j) Transfer Documents. Seller and Owners, as appropriate, shall have
executed and delivered the Transfer Documents.
(k) Title Report. Buyer shall have completed its due diligence with respect
to a preliminary title report (the "Title Report") with respect to the Real
Estate which shall not have disclosed any liabilities, liens, encumbrances or
exceptions relating to the Real Estate which Buyer determines is not
satisfactory to Buyer. Unless Buyer shall have given notice to Seller in writing
by the close of business (eastern time) on December 22, 1995 that the due
diligence results are not satisfactory, the Buyer shall be deemed to have found
such due diligence results satisfactory and Buyer shall be deemed to have waived
this condition.
(l) Title Policy. Buyer shall have received a title insurance policy with
respect to the Real Estate in the amount of $3,000,000 from Chicago Title
Insurance Company or another insurer reasonably satisfactory to Buyer which
shall reflect no Liens or exceptions to title except Liens or exceptions
reflected on the Title Report as to which Buyer has not objected pursuant to
Section 7.01(k) above.
(m) Transitional Services Agreement. Buyer and Seller shall have executed
and delivered an agreement in substantially the form of Exhibit E hereto
pursuant to which Seller will provide the transitional services to Buyer during
the period and upon the terms set forth therein (the "Transitional Services
Agreement").
7.02. Conditions to Seller's Obligation to Close. The obligation of
Seller's to close is subject to the fulfillment
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(either by satisfaction or by written waiver by Seller), on or before the
Closing Date, of the following conditions:
(a) Regulatory Approvals. The transactions contemplated by this Agreement
shall have been approved by any federal, state, local and foreign governmental
or regulatory authority or self-regulatory body the approval of which is
required to permit consummation thereof; and all waiting periods arising under
the HSR Act or any other applicable federal, state, local or foreign law shall
have duly lapsed or been terminated.
(b) No Orders. Neither Seller, any Owner, Buyer nor Parent shall be subject
to any order, decree or injunction of a court or agency of competent
jurisdiction which either enjoins or prohibits the consummation of any of the
transactions contemplated by this Agreement.
(c) Representations and Warranties. The representations and warranties of
Buyer and Parent set forth or referred to in this Agreement shall be true and
correct in all material respects as of the Closing Date, except (i) for any such
representations and warranties made as of a specified date, which shall be true
and correct in all material respects as of such date, or (ii) as expressly
contemplated or permitted by this Agreement.
(d) Performance of Agreements and Covenants. Each and all of the agreements
and covenants of Buyer and Parent to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the Closing
Date shall have been duly performed and complied with by it in all material
respects.
(e) Certificates. Buyer shall have delivered to Seller a certificate, dated
as of the Closing Date and signed on its behalf by its chief executive officer
and its chief financial officer (in their capacities as such and not
individually), to the effect that the conditions of its obligations set forth in
subsections (c) and (d) of this Section 7.02 with respect to it have been
satisfied.
(f) Legal Opinion. Seller shall have received a written opinion, dated the
Closing Date, from counsel for Buyer and Parent in substantially the form of
Exhibit F hereto.
(g) Secretary's Certificate. Seller shall have received a certificate dated
the Closing Date from the Secretary of Buyer and Parent (in his capacity as such
and not individually) as to the articles of incorporation or similar document,
bylaws, incumbency and resolutions by the board of directors of Buyer and
Parent.
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(h) Transfer Documents. Buyer shall have executed and delivered to Seller
the Transfer Documents to which it is a party and the Transaction Services
Agreement.
(i) Consents. Seller shall have obtained all the consents and approvals
contemplated by Section 7.01(h) hereof.
ARTICLE VIII
ENVIRONMENTAL MATTERS
8.01. Environmental Representations and Warranties of Seller. As of the
date hereof and as of the Closing Date, Seller hereby represents and warrants to
Buyer that, to Seller's knowledge, with respect to the Assets and the operation
of the Business located in Macon, Mississippi, except as specifically set forth
in the Environmental Assessment:
(a) The assets owned, leased, used or operated by Seller in the Business
located in Macon, Mississippi (the "Operating Assets") are and have been, in
material compliance with all applicable Environmental Laws (as defined below),
and all rules, regulations, permits, licenses or other authorizations,
standards, and requirements thereunder.
(b) There is no suit, claim, action, notification or proceeding, pending
or, to the knowledge of Seller, threatened, before any court, governmental
agency, board or other forum pursuant to which Seller or any Owner has been or,
with respect to threatened proceedings, may be named as a defendant or a
potentially responsible party, or arising out of Seller's or any Owner's
ownership, leasing or operation of the Operating Assets (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material (as
defined below), whether or not occurring at or on any site owned (including as
trustee), leased or operated by Seller or any Operating Assets.
(c) To the knowledge of Seller, there is no reasonable basis for any suit,
claim, action or proceeding of a type described in Section 8.01(b).
(d) During the period of (i) the ownership (including as trustee), leasing
or operation of any of the Operating Assets by Seller or any Affiliate of
Seller, or (ii) participation by Seller or any Affiliate of Seller in the
management of any property involved in the Business, there has been no Release
(as defined below) or threatened Release of Hazardous Material in, on, under or
affecting any such property in violation of Environmental Laws, good practice or
contrary to the highest and best use of the Operating Assets.
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(e) To the knowledge of Seller, prior to the period of the ownership
(including as trustee), leasing, operation or participation in the management of
the Real Estate by Seller or any Affiliate of Seller, there was no Release of
Hazardous Material in, on, under or affecting the Real Estate in violation of
Environmental Laws, good practice or contrary to the highest and best use of the
Operating Assets.
(f) No underground storage tanks are located at the Real Estate and, to
Seller's knowledge, no underground storage tanks have ever been removed from any
of the Real Estate. All above-ground storage tanks located on the Real Estate
have been used and maintained in compliance with all applicable legal
requirements, and no leakage or spillage has occurred with respect to any such
storage tank.
(g) Schedule 8.01(g) hereto lists all environmental assessments,
investigations, surveys, sample results, reports of releases, notices of
violation, and administrative orders or judicial proceedings relating to
environmental compliance and conditions, with respect to the Business, the
Assets or the Operating Assets. Copies of the materials described in the
preceding sentence have been provided to Buyer. All books, papers, documents and
other materials provided to Buyer pursuant to this Section 8.01 are true,
complete and accurate.
(h) The Real Estate is not listed or, to the knowledge of Seller, proposed
for listing on the National Priorities List pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, as amended ("CERCLA"),
or the Comprehensive Environmental Response, Compensation and Liability
Information System List ("CERCLIS") or on any similar state or foreign list of
sites requiring investigation or cleanup; and no Lien has been filed against any
Operating Assets under any Environmental Law.
(i) The following definitions apply for purposes of this Section 8.01:
(i) "Hazardous Material" means (x) any flammable substance, explosive,
radioactive material, hazardous material, hazardous waste, toxic substance,
solid waste, pollutant, contaminant or any related material, raw material,
substance, product or by-product of any substance specified in or regulated
or otherwise affected by any Environmental Law (including but not limited
to any "hazardous substance" as defined in the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., or
any similar federal, state, local or foreign law), (y) any toxic chemical
or other substance from or related to industrial, commercial or
institutional activities and (z) asbestos, gasoline, diesel fuel, motor
oil, waste and used oil, heating oil and other petroleum products or
compounds, polychlorinated biphenyls, radon and urea formaldehyde;
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(ii) "Environmental Law" means any applicable federal, state, local or
foreign law, rule or regulation relating to (1) pollution or protection of
the environment, including natural resources, (2) exposure of persons,
including but not limited to employees, to Hazardous Materials, (3)
protection of the public health or welfare from the effects of products,
by-products, wastes, emissions, discharges or releases of Hazardous
Materials or (4) regulation of the manufacture, use or introduction into
commerce of Hazardous Materials including their manufacture, formulation,
packaging, labeling, distribution, transportation, handling, storage or
disposal; and
(iii) "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment.
8.02. Environmental Covenant of Seller. Subject to Section 10.01 hereof,
Seller hereby agrees that the costs (including any potential surcharges, fines
or penalties) of remediating any conditions identified pursuant to the
Environmental Assessments and the costs of remedying noncompliance with any
applicable Environmental Laws, which noncompliance is discovered during the
course of Buyer's due diligence, shall be paid by Seller.
ARTICLE IX
GUARANTY
9.01. Guaranty Provisions. (a) Guaranty. The Parent hereby absolutely,
unconditionally and irrevocably guarantees and becomes surety for the full and
punctual payment of any and all liabilities and performance of any and all
obligations of Buyer under this Agreement, the Transfer Documents to which it is
a party and the Transitional Services Agreement (the "Guaranteed Obligations")
as and when such payment or performance shall become due in accordance with the
terms of such documents (the "Buyer Documents"). Parent's obligations under this
Section 9.01 constitute an absolute, irrevocable, present and continuing
guarantee of payment and performance and not merely of collectibility, and is in
no way conditioned upon any attempt to collect from or proceed against the Buyer
or any other Person or any other event or circumstance. The obligations of the
Parent under this Section 9.01 are direct and primary obligations of the Parent
and are independent of the obligations of the Buyer for the Guaranteed
Obligations, and a separate action or actions may be brought against the Parent
regardless of whether action is brought against the Buyer or any other person or
whether the Buyer or any other person is joined in any such action or actions.
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(b) Obligations Absolute. The Parent agrees that the Guaranteed Obligations
will be paid and performed strictly in accordance with the terms of the Buyer
Documents, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting the Guaranteed Obligations, any of the terms of
the Buyer Documents or the rights of the Seller or any other person with respect
thereto. To the fullest extent permitted by law, the obligations of the Parent
under this Section 9.01 shall be absolute, unconditional and irrevocable,
irrespective of any of the following:
(i) any lack of legality, validity, enforceability or allowability
(in a bankruptcy, insolvency, reorganization, dissolution or similar
proceeding, or otherwise), or any avoidance or subordination, in whole or
in part, of any Buyer Document or any of the Guaranteed Obligations; or
(ii) any change in the time, place or manner of payment of, or in
any other term of, any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from any Buyer Document;
or
(iii) any impairment by the Seller or any other person of any
recourse of the Parent against the Buyer or any other person; or
(iv) any bankruptcy, insolvency, reorganization, dissolution or
similar proceedings with respect to, or any change, restructuring or
termination of the corporate structure or existence of, the Buyer or any
other person; or
(v) the release or agreement not to sue without reservation of
rights of Buyer, any other Person liable in any way for payment or
performance of the Guaranteed Obligations; or
(vi) the existence of any set-off right, or claim or any defense of
any kind or nature, which Parent may have against Buyer or any other Person
(other than Seller or Owners); or
(vii) the power or authority or lack of power or authority of Buyer
to execute and deliver the Buyer Document; or
(viii) the existence or non-existence of Buyer as a legal entity; or
(ix) the transfer by Buyer of all, or any part of, or any interest
under the Buyer Documents.
(c) Waivers, etc. To the fullest extent permitted by law, the Parent
hereby waives promptness, diligence, notice of
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acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Section 9.01, any requirement of acceptance hereof,
reliance hereon or knowledge hereof by the Seller, and any requirement that the
Seller exhaust any right or take any action against the Buyer or any other
person or any collateral or other direct or indirect security for any of the
Guaranteed Obligations.
(d) Reinstatement. The obligations of Parent under this Section 9.01 shall
continue to be effective, or be automatically reinstated, as the case may be, if
at any time payment of any of the Guaranteed Obligations is avoided, rescinded
or must otherwise be returned by the Seller for any reason, all as though such
payment has not been made.
(e) Subrogation, etc. Any rights which the Parent may have or acquire by
way of subrogation, reimbursement, exoneration, contribution or indemnity, and
any similar rights (whether arising by operation of law, by agreement or
otherwise), against the Buyer, arising from the existence, payment, performance
or enforcement of any of the obligations of the Parent under or in connection
with this Section 9.01, shall be subordinate in right of payment to the
Guaranteed Obligations, and the Parent shall not exercise any such rights until
all Guaranteed Obligations and all other obligations under this Section 9.01
have been paid in full.
(f) Continuing Agreement. This Section 9.01 is a continuing guaranty and
shall continue in full force and effect until all Guaranteed Obligations and all
other amounts payable under this Section 9.01 have been paid and performed in
full.
ARTICLE X
TERMINATION
10.01. Termination. Except as hereinafter in this Article X expressly
provided, this Agreement and the rights and obligations of the parties hereunder
shall terminate and be of no further force and effect upon the happening of one
of the following events:
(a) At any time upon the mutual written agreement of the parties hereto;
(b) At any time on or after January 31, 1996 by Buyer (provided it is not
in default of its obligations hereunder) by written notice to Seller
if the conditions set forth in Section 7.01 hereof shall not have been
satisfied;
(c) At any time on or after January 31, 1996 by Seller (provided it is not
in default of its obligations hereunder) by written notice to
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Buyer if the conditions set forth in Section 7.02 hereof shall not
have been satisfied; or
(d) At any time by Seller by written notice to Buyer if the aggregate
amount necessary for Seller to comply with Section 8.02 hereof and to
remove any Liens (other than the Lien referred to in Schedule 3.04
hereto) reflected in the Title Report which are not satisfactory to
Buyer shall exceed $150,000.
Notwithstanding any such termination, the provisions of Section 5.02(i), Section
6.01, Section 6.03 and Section 12.06 shall remain in full force and effect.
10.02. Effect of Termination. In the event of a termination of this
Agreement pursuant to Section 10.01, no party hereto shall have any claims or
actions against any other party hereto arising from or relating to this
Agreement except (i) pursuant to the terms of Section 1.03 hereof, (ii) pursuant
to the provisions of this Agreement which expressly survive the termination
and/or (iii) for actual fraud or willful failure or refusal on the part of a
party to perform its obligations or covenants hereunder.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.01. Survival. All covenants and agreements contained herein shall
survive the Closing. The representations and warranties made in this Agreement
shall survive for 15 months from the Closing Date; provided, however, that the
representations and warranties in Sections 3.08 and 3.14(b) hereof shall survive
for the applicable statute of limitations periods and the representations and
warranties in Section 8.01 hereof shall survive for three years from the Closing
Date.
11.02. Indemnification by Seller. Seller hereby indemnifies and holds
harmless each of Buyer and its officers, directors, agents and employees, and
each Affiliate of Buyer (each an "Indemnified Buyer Person", collectively
"Indemnified Buyer Persons") from and against any and all claims, demands,
actions, causes of action, losses, costs, damages (limited to actual damages but
in no event lost profits, net of any related tax benefits and insurance
recoveries), liabilities and expenses including, without limitation, reasonable
legal fees (hereinafter, the "Buyer Damages"), arising out of any of the
following: (i) any misrepresentation or breach of any of the representations or
warranties given or made by Seller or any Owner in this Agreement, any Transfer
Document or any other certificate, instrument or other document delivered by or
on
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behalf of Seller or any Owner on the Closing Date in connection with the
Acquisition (the "Transaction Documents"); (ii) any breach of any of the
covenants given or made by Seller or any Owner in this Agreement or any other
Transaction Document; (iii) any liability of Seller or any Owner with respect to
any federal, state, local or foreign sales, use, income, profits or other tax
(or penalties and interest thereon) other than any such taxes which are Current
Liabilities or are attributable to or arising out of operations, events or
circumstances relating to the Business occurring after the Closing; (iv) any
claims for injuries to persons or property arising out of the use or operation
of any of the products of Seller manufactured (provided that such products are
sold within nine (9) months following the Closing Date) or sold prior to the
Closing; (v) any other claims based upon breach of warranty, breach of contract
or negligence with respect to any such products except that Seller shall not be
required to indemnify any Buyer Indemnified Person with respect to the initial
$225,000 of product replacement and product warranty claims asserted each
calendar year (or portion thereof) following the Closing with respect to
products manufactured and sold by Seller in the Business; (vi) failure to comply
with any applicable bulk sales laws in connection with the transfer of the
Assets hereunder; (vii) any liability incurred by Seller or any Owner for
brokerage fees, finder's fees, agent's commissions or other similar forms of
compensation in connection with this Agreement or the Acquisition; or (viii) any
other liability or obligation of Seller or any Owner, including any such
liability or obligation, whether known or unknown, accrued, actual or
contingent, liquidated or unliquidated, of Seller or any Owner incurred,
attributable to, or arising out of the operation of the Business on or before
the Closing Date, other than, in each of the foregoing cases set forth in
clauses (i) through (ix) hereof, the Assumed Liabilities.
11.03. Indemnification by Buyer. Buyer hereby indemnifies and holds
harmless each of Seller and its officers, directors, agents and employees, and
each Affiliate of Seller (each an "Indemnified Seller Person", collectively
"Indemnified Seller Persons") from and against any and all claims, demands,
actions, causes of action, losses, costs, damages (limited to actual damages but
in no event lost profits, net of any related tax benefits and insurance
recoveries), liabilities and expenses including, without limitation, reasonable
legal fees (hereinafter, the "Seller Damages"), arising out of (i) any
misrepresentation or breach of any of the representations and warranties given
or made by Buyer in this Agreement, any Transfer Document to which Buyer is a
party, the Transitional Services Agreement or any certificate, document or
instrument delivered by or on behalf of Buyer on the Closing Date in connection
with the Acquisition (the "Buyer Documents"), (ii) the conduct of the Business
and/or the use or ownership of the Assets after the Closing, (iii) any Assumed
Liabilities, (iv) any liability of Seller under any law or regulation resulting
from discharges of
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Employees by Buyer after the Closing Date, (v) any breach of any of the
covenants given or made by Buyer in this Agreement or any other Buyer Document,
(vi) any liability of Seller arising from Buyer's administering the tests
contemplated by Section 6.04 (other than any liability arising from any
contractual arrangement between Seller and any Employee) or (vii) any liability
incurred by Buyer or Parent for brokerage fees, finder's fees, agent's
commissions or other similar forms of compensation in connection with this
Agreement.
11.04. Indemnification Procedures.
(a) Indemnification. As used herein, with respect to Seller Damages, the
term "Indemnitor" shall mean Buyer, and "Indemnitee" shall mean Seller; with
respect to Buyer Damages, the term "Indemnitor" shall mean Seller, and
"Indemnitee" shall mean Buyer; the term "Damages" shall mean, as appropriate,
Seller Damages or Buyer Damages. Promptly after the receipt by an Indemnitee of
notice or discovery of any Damages, whether or not giving rise to
indemnification rights hereunder, such Indemnitee will give the Indemnitor
written notice of such Damages (a "Claim") in accordance with paragraph (b) of
this section. If such Claim involves third parties, within fifteen days of
delivery of such written notice the Indemnitor may, at the expense of the
Indemnitor, elect to take all necessary steps properly to contest any Claim
involving third parties or to prosecute such Claim to conclusion or settlement
satisfactory to the Indemnitor. If the Indemnitor makes the foregoing election,
the Indemnitee will have the right to participate at its own expense in all
proceedings. If the Indemnitor does not make such election, the Indemnitee
shall be free to handle the prosecution or defense of any such Claim at the sole
cost of the Indemnitor and will timely notify the Indemnitor of the progress of
any such Claim, will permit the Indemnitor at the sole cost of the Indemnitor to
participate in such prosecution or defense and will provide the Indemnitor with
reasonable access to all relevant information and documentation relating to the
Claim and the Indemnitee's prosecution or defense thereof. In any case, the
party not in control of the Claim will cooperate with the other party in the
conduct of the prosecution or defense of such Claim. The Indemnitor shall have
the right to compromise or settle, with the Indemnitee's prior written consent
(which shall not be unreasonably withheld, conditioned or delayed, except no
such consent shall be required if such compromise or settlement involves only
the payment of money damages and does not impose an injunction or other
equitable relief upon the Indemnitee), any Claim. In the event the Indemnitee
refuses to consent to any compromise or settlement recommended by the Indemnitor
which would have been concluded but for the Indemnitee's failure to give
consent, then the Indemnitor's liability to the Indemnitee hereunder with
respect to any such Claim which would have been barred by such compromise or
settlement shall not exceed the amount which the Indemnitor would have paid
pursuant to said proposed compromise or settlement.
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<PAGE>
(b) Notice of Claim. Each notice of a Claim by the Indemnitee (the "Notice
of Claim") will be in writing and will contain the following information to the
extent it is reasonably available to the Indemnitee:
(i) the Indemnitee's good faith estimate of the reasonably
foreseeable amount of the alleged Damages (which amount, in the case of a
Claim involving a third party, may be the amount of damages claimed by any
third party plaintiff in an action brought against the Indemnitee based on
alleged facts, which if true, would constitute a breach of the Indemnitor's
representations and warranties); and
(ii) A brief description in reasonable detail of the facts,
circumstances or events giving rise to the alleged Damages based on the
Indemnitee's good faith belief thereof, including, without limitation, the
identity and address of any third party claimant (to the extent reasonably
available to the Indemnitee) and copies of any formal demand or complaint.
(c) Resolution of Notice of Claim. Any Notice of Claim received by the
Indemnitor pursuant to paragraph (b) above will be resolved as follows:
(i) Uncontested Claims. In the event that Indemnitor does not contest
a Notice of Claim in writing to Indemnitee within 20 calendar days after a
Notice of Claim containing a statement of the claimed Damages is delivered
pursuant hereto, Indemnitor shall pay the amount of Damages specified in
the Notice of Claim within 20 days after delivery of such Notice of Claim.
(ii) Contested Claims. Contested Claims (as hereinafter defined)
shall be resolved by such dispute procedure as the parties shall agree to
or failing such agreement by a proceeding brought in accordance with
Section 12.03 hereof. In the event that the Indemnitor gives written
notice contesting all, or a portion of, a Notice of Claim to the Indemnitee
(a "Contested Claim") within the 20-day period provided above, matters that
are subject to third party claims brought against Buyer or Seller in a
litigation or arbitration will await the final decision, award or
settlement of such litigation. Any portion of the Notice of Claim that is
not contested will be resolved as set forth above in paragraph (c)(i).
(d) Product Warranty and Product Liability Claims. With respect to matters
covered by Section 11.02(v), Buyer shall promptly advise Seller in the event
that either (i) the amount of claims of the nature referred to therein is
reasonably expected to exceed $225,000 in any calendar year or (ii) Buyer has
received a substantial number of similar or repetitive claims. With respect
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to Claims of the nature referred to in Section 11.02(iv), Buyer shall handle
such Claims in accordance with the normal procedures of Parent in respect of
product liability claims, which includes involvement of the Division President,
and in the same manner and with the same diligence as Parent handles such
claims.
(e) Other Matters. The provisions of this Section 11.04 shall apply to all
Claims except that, notwithstanding Section 11.04(a), with respect to any Claim
under Section 11.02(i) involving third parties which, together with all Claims
theretofore made under such Section, does not exceed the Threshold Amount, Buyer
shall be entitled to prosecute or defend such Claim in good faith using the same
prudence and business judgment as Parent would use if Buyer had no
indemnification rights hereunder, until such time as Seller shall reasonably
determine that the Threshold Amount has been or is likely to be exceeded, at
which time Seller shall be entitled to assume such prosecution or defense in
accordance with Section 11.04. If the Threshold Amount is so exceeded the cost
of such defense or prosecution shall be included in the Claim.
Section 11.05. Limitations. Notwithstanding anything to the contrary set
forth in this Article XI:
(a) In the event that before the Closing Date Seller notifies Buyer of any
development which causes any representation, warranty or covenant made by or on
behalf of Seller or any Owner in any Transaction Document to be incorrect or
breached in any material respect, specifying such development and each such
representation, warranty or covenant and within 24 hours of receipt of such
notice, Buyer shall not have advised Seller that Buyer does not waive such
breach, each such representation, warranty or covenant shall be deemed amended
to the extent, but only to the extent, necessary to reflect such development. If
Buyer elects not to waive such breach, then this Agreement shall terminate in
accordance with the provisions of Section 10.02 hereof and the Escrow Agent
shall return the Earnest Money, together with accrued interest thereon, to
Buyer.
(b) In the event that Buyer elects to close the Acquisition despite the
fact that Buyer has actual knowledge of a fact or circumstance which causes one
or more of the conditions set forth in Section 7.01 not to have been fulfilled,
Buyer shall be deemed to have waived such condition or conditions to the extent,
but only to the extent, of such fact or circumstance and shall have no Claim
against Seller or any Owner with respect to such fact or circumstance;
(c) Seller shall not have any obligation to indemnify any Indemnified
Buyer Person (i) with respect to any Claim as to any matters referred to in
Section 11.02(i) (other than a breach of the representations and warranties set
forth in Section 3.25) unless and until the aggregate amount of all Claims under
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Section 11.02(i) exceeds $400,000 (the "Threshold Amount"); provided that once
the aggregate amount of all Claims under Section 11.02(i) exceeds the Threshold
Amount the Claims which would otherwise be excluded from indemnification by
virtue of this clause (i) shall no longer be so excluded and (ii) subject to
clause (e) of this Section 11.05, with respect to any Claims, once the aggregate
amount of all Claims paid by Seller hereunder equal $7,500,000; and
(d) In the event that the aggregate amount received by Buyer from the
Closing Date through the six month anniversary of the Closing Date from the
collection of the accounts receivable reflected on the Closing Date Balance
Sheet ("Closing Receivables") shall be less than the amount of the Closing
Receivables (net of any applicable reserve) reflected on such Closing Date
Balance Sheet, Seller shall, on demand from Buyer, repurchase from Buyer, the
uncollected Closing Receivables at the face amount thereof. In determining
whether a particular Closing Receivable has been paid, Buyer shall apply
payments received from customers on a "first in - first out" basis unless the
customer shall specify that a particular payment is for a particular invoice or
in the case of an on account payment a particular amount is in dispute. Buyer
shall sell such Closing Receivables to Seller without representation or warranty
of any kind except that Buyer shall warrant that the Closing Receivables sold
are free of Liens in favor of any person claiming by, through or under Buyer.
(e) The provisions of this Article XI shall constitute the exclusive remedy
of all Buyer Indemnified Persons and Seller Indemnified Persons for any and all
claims by any such person against any party hereto relating to the Transaction
Documents or the Buyer Documents and the transactions contemplated hereby or
thereby except for suits or proceedings permitted or contemplated by Section
10.02 or 12.04 hereof.
ARTICLE XII
GENERAL PROVISIONS
12.01. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly received (i) on the date given
if delivered personally or by telecopy (with a copy thereof sent promptly in
accordance with clause (ii)) or (ii) on the date received if mailed by
registered or certified mail (return receipt requested) or sent via nationally
recognized overnight courier service, to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
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<PAGE>
(a) if to Buyer or Parent:
Heritage Vinyl Products Inc.
c/o Jannock, Inc.
Foster Plaza Seven
661 Andersen Drive
Pittsburgh, PA 15220
Attention: President
Fax No. 412-928-5745
with a copy to:
R. Harold Weir, Esquire
Vice President, Secretary and
General Counsel
Jannock Limited
Suite 5205 Scotia Plaza
40 King Street West
Toronto, Ontario M5H 3Y2
Fax No. 416-364-9342
and a copy to:
Thomas Todd, Esquire
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, Pennsylvania 15219
Fax No. 412-288-3063
(b) if to Seller or any Owner:
The GSI Group, Inc.
f/k/a Grain Systems, Inc.
1004 East Illinois Street
P.O. Box 20
Assumption, Illinois 62510
Attention: Craig Sloan
Chief Executive Officer
Fax No.: 217-226-4439
with a copy to:
The GSI Group, Inc.
f/k/a Grain Systems, Inc.
P.O. Box 20
1004 East Illinois Street
Assumption, Illinois 62510
Attention: John Funk, Esquire
Vice President and General Counsel
Fax No. 217-226-4439
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<PAGE>
and a copy to:
Sachnoff & Weaver, Ltd.
30 South Wacker Drive - 29th Floor
Chicago, Illinois 60606
Attention: Stewart Dolin, Esquire
Fax No. 312-207-6400
12.02. Counterparts. This Agreement may be executed in counterparts
(including executed counterparts delivered and exchanged by facsimile
transmission) each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
12.03. Submission to Jurisdiction; Waiver of Jury Trial. The parties
hereto hereby irrevocably and unconditionally:
(i) Agree that any action, suit or proceeding by any person arising from or
relating to this Agreement or any other Transaction Document or any statement,
course or conduct, act, omission, or event occurring in connection herewith or
therewith (collectively, "Related Litigation") shall be brought only in any
State or Federal Court of competent jurisdiction sitting in Illinois and submit
to the jurisdiction of such courts;
(ii) Waive any objection which any such party may have at anytime to the
laying of venue of any Related Litigation brought in any such court, waive any
claim that any such Related Litigation has been brought in an inconvenient
forum, and waive any right to object, with respect to any Related Litigation
brought in any such court, that such court does not have jurisdiction over such
party;
(iii) Consent and agree to service of any summons, complaint or other
legal process in any Related Litigation by registered or certified U.S. mail,
postage prepaid, to each such party at the respective address for notices
described in Section 12.01 hereof, and consent and agree that such service shall
constitute in every respect valid and effective service (but nothing herein
shall affect the validity or effectiveness of process served in any other manner
permitted by law); and
(iv) Waive the right to trial by jury in any Related Litigation.
12.04. Specific Performance, Etc. The parties agree that the Assets as
a going concern constitute unique property. There is no adequate remedy at law
for the damage which Buyer might sustain for failure of Seller to consummate the
transactions contemplated by this Agreement (provided that such failure is not
as a result of any of the conditions specified in Section 7.02 hereof not being
fulfilled), and accordingly, Buyer shall be entitled, at its option, to the
remedy of specific performance to enforce the sale of the Assets by Seller to
Buyer pursuant to this Agreement. In
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addition, Buyer shall be entitled, at its option, to injunctive or other
appropriate equitable relief for the breach by Seller of Section 5.01 hereof and
Seller shall be entitled to such relief for the breach of Buyer of Section 6.03
hereof. The successful party in any proceeding brought under or in connection
with this Agreement or any other Transaction Documents or Buyer Documents
(including any proceeding under Article XI hereof) shall be entitled, in
addition to all other damages, to be reimbursed for its reasonable costs,
including attorneys and experts fees, incurred in connection with such action.
12.05. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Illinois.
12.06. Expenses. Each party hereto will bear all expenses incurred by
it in connection with this Agreement. Buyer will bear the cost of (i) the HSR
Act filing, including the filing fee, being made by it (ii) the Environmental
Assessments and (iii) the costs of obtaining the survey and the title Insurance
contemplated by Section 7.01 hereof. Buyer and Seller shall each pay half of
the cost of all transfer taxes payable in connection with the transfer of the
Assets from Seller to Buyer (provided that Seller shall be responsible for all
such taxes payable in connection with any such transfer to Seller from any
Affiliate thereof or otherwise).
12.07. Waiver; Amendment. Any provision of this Agreement may be (i)
amended or modified at any time (including the structure of the transactions
contemplated hereby, or any part thereof), by an agreement in writing among the
parties hereto and executed in the same manner as this Agreement or (ii) waived
by the party benefitted by the provision.
12.08. Entire Agreement; No Third-Party Beneficiaries; Etc. This
Agreement, together with all Schedules attached hereto and agreements referred
to herein, represents the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and supersedes any and all
other oral or written agreements heretofore made including in the Letter of
Intent dated November 17, 1995. All terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Except as otherwise
explicitly stated herein, nothing in this Agreement is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
12.09. Assignment. This Agreement may not be assigned by any party
hereto without the prior written consent of the other parties and any purported
assignment in violation hereof shall be null and void.
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12.10. Knowledge. As used herein, the term "knowledge of Seller" or
"knowledge of Buyer" or words of similar import shall mean information which is
known or should be known to management or executive level employees of such
party after reasonable investigation.
12.11. Announcements. (a) Seller and Buyer will consult with each other as
to the form, substance and timing of the initial general notices, releases,
statements and communications with employees, suppliers, distributors and
customers and to the general public and the press relating to this Agreement,
and no such announcement or other public disclosure shall be made without the
consent of the other party, which either party may withhold in its sole
discretion; provided, however, that the foregoing shall only apply to such
announcements as are made prior to the Closing Date.
(b) After the Closing Date, Seller and Buyer will consult with each other
as to the form, substance and timing of the initial notices, releases,
statements and communications with employees, suppliers, distributors and
customers and to the general public and the press relating to this Agreement,
and no such announcement or other public disclosure shall be made without the
consent of the other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that the foregoing restriction shall only be
applicable for thirty (30) days following the Closing Date.
(c) Notwithstanding anything to the contrary in this Section 12.11, the
parties may make such disclosures as are required by law after making reasonable
efforts in the circumstances to consult in advance with the other parties.
Information provided by either party to third parties whose assistance and
cooperation may, in the judgment of such informing party, be required for the
successful consummation of the transactions contemplated hereby shall not be
construed as a general notice, release, statement or communication within the
meaning or intent of this section.
(d) Buyer acknowledges that it has given Seller permission to advise the
Employees of the existence of the transactions contemplated herein.
12.12. Construction. This Agreement has been negotiated by the respective
parties hereto and their attorneys, and language hereof will not be construed
for or against either party. A reference to an article, section, schedule or
exhibit will mean an article or section in, or a schedule or an exhibit to, this
Agreement, unless otherwise explicitly set forth. The titles and headings in
this Agreement are for reference purposes only and will not in any manner limit
the construction of this Agreement. For the purposes of such construction, this
Agreement will be considered as a whole.
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<PAGE>
12.13. Limited Joinder. Each of the Owners joins and becomes a party to
this Agreement for the limited purpose of becoming and being bound by Sections
1.02, 2.01, 2.02, 2.03, 2.06, 2.07(a), 5.01, 5.05 and 11.05 and Article XII
hereof, but only to the extent that such provisions expressly pertain to the
Owners. No other provision of this Agreement shall bind any Owner.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as
of the date first written above.
JANNOCK, INC.
/s/ M. A. Russo
By______________________________
HERITAGE VINYL PRODUCTS INC.
/s/ M. A. Russo
By______________________________
Title: President
THE GSI GROUP, INC. (f/k/a
GRAIN SYSTEMS, INC.)
/s/ John C. Sloan
By:_____________________________
CEO
Title:___________________________
Joined in by the following parties solely for the purposes set forth in
Section 12.13 hereof, as of the date first written above.
/s/ John Funk /s/ Larry Sloan
_____________________________ _____________________________
Witness Larry Sloan
/s/ John Funk /s/ John C. Sloan
_____________________________ _____________________________
Witness John C. Sloan
/s/ John Funk /s/ James E. Sloan
_____________________________ _____________________________
Witness James E. Sloan
/s/ John Funk /s/ Thomas G. Sloan
_____________________________ _____________________________
Witness Thomas G. Sloan
<PAGE>
Exhibit 10.14
STOCK RESTRICTION AND BUY-SELL AGREEMENT
----------------------------------------
THIS STOCK RESTRICTION AND BUY-SELL AGREEMENT is made as of the 6th day of
June, 1996 by and between John C. Sloan ("Sloan"), Jorge Andrade ("Andrade"),
John Funk ("Funk") and Howard Buffett ("Buffett"), and The GSI Group, Inc., a
Delaware corporation (the "Corporation") (Sloan, Andrade, Funk and Buffett are
hereinafter referred to individually as "Shareholder" and collectively as
"Shareholders").
RECITALS
--------
The Shareholders are owners and holders of all of the issued and
outstanding stock of the Corporation.
As of the date hereof, the outstanding stock of the Corporation is held as
follows:
<TABLE>
<CAPTION>
Name Voting Non-Voting
---- ------ ----------
<S> <C> <C>
Sloan 1,175,000 shares 200,000 shares
Andrade 300,000 shares 0 shares
Funk 225,000 shares 0 shares
Buffett 100,000 shares 0 shares
</TABLE>
The parties hereto believe that in the interest of their continued success,
it is desirable to maintain continuity in the management, policies and ownership
of the Corporation, provide for the purchase of Shares upon the occurrence of
certain contingencies and provide certain other agreements as more fully set
forth herein.
The Shareholders have entered into a Stock Restriction and Cross Purchase
Agreement ("Cross Purchase Agreement") dated as of the date hereof relating to
the purchase of the shares upon the death of any of the Shareholders. In the
event of a conflict between the provisions of the Cross Purchase Agreement and
the provisions of this Agreement, the Cross Purchase Agreement shall prevail
with respect to such conflict.
NOW, THEREFORE, for and in consideration of the above premises and the
mutual covenants and agreements hereinafter contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE
1
INCORPORATION OF RECITALS AND DEFINITIONS
-----------------------------------------
1.1. Incorporation of Recitals. The Recitals are incorporated herein and
constitute covenants, representations and warranties of the Shareholders.
<PAGE>
1.2. Definitions. For purposes of this Agreement:
(a) The term "and/or" shall mean one or the other or both, or any one
or more or all, of the things or persons in connection with which the
conjunction is used.
(b) The term "Remaining Shareholders" shall mean the Shareholders
either (i) who are not selling their Shares pursuant to Article 3 hereof; or
(ii) whose Shares are not the subject of a purchase pursuant to Article 4
hereof.
(c) The term "Requisite Vote" shall mean: (i) at any time that there
are two (2) Shareholders or less, the affirmative vote of the Shareholders
owning more than fifty percent (50%) of the outstanding Shares entitled to vote,
and (ii) at any time that there are three (3) or more Shareholders, the
affirmative vote of the Shareholders owning more than fifty percent (50%) of the
outstanding Shares entitled to vote, provided that the matter under
consideration shall have also received the affirmative vote of all Shareholders
owning, Shares entitled to vote, except for any one (1) Shareholder.
(d) The term "Shares" shall mean all shares of the Corporation's
common stock, whether voting or non-voting, now owned or hereafter acquired by
any Shareholder, including but not limited to, newly authorized shares, shares
issued out of authorized but unissued stock, shares issued or credited in
connection with any stock dividend, stock split, or other capital readjustment,
as well as any voting trust certificates (there being none at this date)
representing any shares of stock issued by the Corporation and owned by the
Shareholder which are part of any voting trust or similar agreement.
(e) The term "Shareholders" and/or "Shareholder" shall mean Sloan,
Andrade, Funk and Buffett and/or any other person or entity that at any time may
become a party hereto by reason of his, her or its ownership of Shares.
ARTICLE
2
RESTRICTION ON SHARES
---------------------
2.1. Prohibition on Transfer. Except as (i) expressly permitted herein;
(ii) provided under a certain pledge agreement between LaSalle National Bank and
the Shareholders, (the "LaSalle Pledge Agreement"), and pledge agreements
between the Shareholders and each of Larry Sloan, Thomas G. Sloan and James E.
Sloan (collectively, the "Sloan Pledge Agreements"); (iii) provided under the
Stock Restriction and Cross Purchase Agreement dated of even date hereof among
the Shareholders (the "Cross Purchase Agreement"); or (iv) provided for in the
Contribution Agreement dated of even date herewith among the Shareholders (the
"Contribution Agreement"), a Shareholder shall not at any time sell, pledge,
hypothecate,
2
<PAGE>
transfer, encumber, assign, give away or in any way dispose of any Shares now
owned or hereafter acquired by him, nor shall such Shares be transferable,
voluntarily or involuntarily, by operation of law or otherwise, except in strict
compliance with the covenants, terms and conditions set forth in this Agreement.
Any attempt to do so in violation of this Agreement shall not be recognized by
the Corporation and shall be null and void and of no force or effect whatsoever.
2.2. Follow Along Rights and Obligations. Notwithstanding the restrictions
set forth in Sections 2.1 or 2.4 hereof, the Shareholders owning more than fifty
percent (50%) of the outstanding Shares entitled to vote ("Controlling
Shareholders") may elect at any time to:
(a) sell all, but not less than all, of their respective Shares,
without first having to comply with the provisions of this Agreement, provided
that:
(i) the Shareholders, other than the Controlling Shareholders
("Noncontrolling Shareholders") shall have the right to
participate in such sale on the same terms and conditions,
including without limitation price, as those which pertain to the
Shares being sold by the Controlling Shareholders, and
(ii) the Controlling Shareholders shall have the right to require that
the Noncontrolling Shareholders sell their Shares on the same
terms and conditions, including, without limitation price, as
those which pertain to the Shares being sold by the Controlling
Shareholders.
(b) cause the Corporation to register its Shares under the Securities
Act of 1933, as amended, in a bona fide underwritten public offering (a "Public
Offering").
2.3. Restriction on Certificates. The Corporation shall cause to be placed
on each certificate of its Shares which may now or hereafter be issued to a
Shareholder (except certificates evidencing Shares sold free of the restrictions
of this Agreement), a notice in the following form:
"The shares of stock evidenced by this Certificate are subject to the terms
and conditions of a certain Stock Restriction and Buy-Sell Agreement, dated
June 6, 1996 ("Agreement"), between the Corporation and the Shareholders. A
copy of the Agreement is on file at the offices of the Corporation,
reference to all the terms and conditions thereof being hereby made. No
sale or transfer of the Shares evidenced hereby may be effected, except
pursuant to the terms and conditions of the Agreement."
If such legend is placed on the reverse side rather than the face of any
such certificate, there shall be placed on the face of such certificate a legend
in the following form:
"For restrictions on transfer, see notice on reverse side hereof."
3
<PAGE>
2.4. Wrongful Transfer. Subject to Sections 2.1 and 2.2 hereof, no sale,
pledge, hypothecation, transfer, encumbrance, assignment, gift or other
disposition by a Shareholder of any of his Shares shall be effective, unless and
until: (i) he has first complied with all the provisions of this Agreement, and
(ii) such transferee shall take such Shares subject to the terms of this
Agreement, shall agree in writing to become a party to this Agreement and to be
bound by all of the terms, conditions and provisions hereof. If a Shareholder
fails to comply with this Agreement, the Corporation shall have the right to
compel such Shareholder or any transferee to transfer and deliver its Shares in
accordance with the provisions of this Agreement.
2.5. Maintenance of S Corporation Status.
(a) Each Shareholder agrees that he or she will take all action
necessary to permit the Corporation to retain its tax status an S Corporation
("S Corporation") under Subchapter S (Section 1361 et seq) of the Internal
Revenue Code of 1986, as amended (the "Code"), including but not limited to, the
execution and delivery of any and all consents and other documents required at
any time for the continuance of S Corporation status, or required to carry out,
effectuate, implement or exercise any and all other elections available to, or
powers exercisable by, a corporation having elected S Corporation status. Except
as otherwise specifically provided in this Agreement, the Shareholders shall not
take any action which will cause the Corporation not to be taxed as an S
Corporation.
(b) Subject to the limitations of the Delaware General Corporation Law
("DGCL"), as long as the Corporation remains an S Corporation, the Shareholders
agree to take all actions necessary to cause the directors of the Corporation to
declare and pay to the Shareholders dividends each year in an amount not less
than all federal and state income taxes, including but not limited to estimated
tax payments, payable by the Shareholders each year with respect to the income
of the Corporation, based upon the maximum marginal federal and state individual
income tax rates applicable to any Shareholder.
(c) Upon any transfer of the Shares permitted hereunder, the
Corporation may require arrangements reasonably satisfactory to it to assure
that any transferee shall take any and all action necessary to maintain the
election under Section 1362(a) of the Code (including without limitation, with
respect to any transfer in trust, the timely filing of an election to treat such
trust as a qualified Subchapter S Trust under Section 1361(d) of the Code).
2.6. Shareholder Approval for Significant Corporate Matters.
Notwithstanding any provision contained in the Certificate of Incorporation, the
By-Laws of the Corporation, any other agreement between the Shareholders and the
Corporation or under the DGCL, the Requisite Vote of the Shareholders shall be
required in connection with the following matters ("Significant Corporate
Matters"), except as expressly provided below:
(a) the authorization of additional Shares; provided, however, that in
the event additional Shares are to be authorized in connection with a Public
Offering, then such
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authorization shall only require the approval of the holders of more than fifty
percent (50%) of the outstanding Shares entitled to vote;
(b) the termination of the election to be treated as a S Corporation
under the Code.
(c) the acquisition or divestiture of any business segment or asset
which alone, or in the aggregate, has a value in excess of $250,000, excluding,
however, the sale of substantially all of the business and/or assets of the
Corporation, which shall only require the approval of the holders of more than
fifty percent (50%) of the outstanding Shares entitled to vote;
(d) the adoption or approval of a stock option or equity based
incentive plan for the benefit of employees of the Corporation;
(e) the exercise by the Corporation of any call option or other right
to purchase shares under any plan described in d. above; and
(f) any amendment to the Certificate of Incorporation or By-Laws of
the Corporation.
All matters which under the DGCL, the Certificate of Incorporation or the
By-Laws of the Corporation require Shareholder approval but do not involve any
Significant Corporate Matters shall require the affirmative vote of the holders
of more than fifty percent (50%) of the outstanding Shares entitled to vote.
ARTICLE
3
PURCHASE OF SHARES - RIGHT OF FIRST OFFER
-----------------------------------------
3.1. Notice of Transfer. If a Shareholder ("Offering Shareholder") receives
during his lifetime a bona fide offer ("Offer") to sell or otherwise transfer
any or all of his Shares or the right to vote said Shares, or any combination
thereof ("Offered Shares") to any person or entity, the Offering Shareholder
shall give at least sixty (60) days prior written notice to the Corporation and
the Remaining Shareholders of his intention to so transfer his Shares (the
"Notice"). The Notice shall state (i) the number of Offered Shares; (ii) the
name, business and residence address of the proposed transferee (the
"Transferee"); (iii) whether or not the transfer is for valuable consideration
and, if so, the consideration (the "Offered Price"); (iv) the date upon which
the proposed transfer to the Transferee is to be consummated; and (v) all other
material terms of the proposed transfer. A copy of any written agreement
(whether executed or not) evidencing the Offer shall be attached to the Notice.
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3.2. Rights of First Offer. From and after the date of the Notice ("Notice
Date"), the Corporation and the Remaining Shareholders shall have options to
purchase the Offered Shares, upon the terms set forth in Section 3.3 hereof,
exercisable in the order of priority and within the time periods set forth
below:
(a) Within thirty-five (35) days after the Notice Date (the
"Corporation's Option Period"), the Corporation shall have the option to acquire
all or any portion of the Offered Shares (the "Corporation's Option"). The
Corporation shall exercise the Corporation's Option, if at all, by giving
written notice to that effect to the Offering Shareholder and the Remaining
Shareholders within the Corporation's Option Period.
(b) Within twenty-five (25) days following the first to occur of (i)
the expiration of the Corporation's Option Period without the Corporation
exercising its option or (ii) the Corporation's written notice to the Offering
Shareholder and the Remaining Shareholders that it will not purchase any or all
of the Offered Shares (the "Remaining Shareholders' Option Period"), the
Remaining Shareholders shall have the option to acquire all of the Offered
Shares not being purchased by the Corporation (the "Remaining Shareholders'
Option"). In the event that one or more of the Remaining Shareholders elects to
purchase the Offering Shareholder's Shares, then unless otherwise agreed, each
electing Remaining Shareholder must purchase that percentage of the Shares
offered by the Offering Shareholder as is equal to his proportionate ownership
of all of the electing Remaining Shareholders' then respective Shares. The
Remaining Shareholders shall exercise the Remaining Shareholders' Option, if at
all, by giving written notice to that effect to the Corporation and the Offering
Shareholder within the Remaining Shareholders' Option Period.
The exercise of the Corporation's Option and/or the Remaining Shareholders'
Option must, in the aggregate, include all of the Offered Shares or the exercise
of such option(s) shall be null and void.
3.3. Purchase Price and Terms. In the event the Corporation's Option and/or
the Remaining Shareholders' Option is exercised, the party(ies) exercising such
option(s) shall purchase the Offered Shares at the lower of (i) the Offered
Price or (ii) the Purchase Price (as hereinafter defined), upon the same terms
and conditions provided in the Notice. The Closing of such purchase shall occur
in the manner described in Section 7.2(a) hereof.
3.4. Failure to Exercise the Corporation's and Remaining Shareholders'
Rights of First Offer Options. Subject to the terms of Section 3.5 hereof, if
the Corporation and/or the Remaining Shareholders fail to exercise their
respective Options in accordance with Section 3.2 hereof to purchase in the
aggregate all of the Offered Shares, the Offered Shares may be transferred to
the Transferee as provided in the Notice. The effectiveness of such transfer is
conditioned upon the Transferee agreeing in writing to be a party to this
Agreement and to be bound by all of the terms, conditions and provisions hereof.
If the transfer does not occur in accordance with the terms disclosed in the
Notice, such transfer shall be automatically null and void without any further
action being required on the part of the Corporation or the Remaining
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Shareholders, and any attempt to transfer the Offered Shares thereafter without
first complying with the terms of this Article 3 shall be deemed a wrongful
transfer within the meaning of Section 2.4 hereof.
ARTICLE
4
PURCHASE OF SHARES
------------------
4.1. Purchase Upon Death of Shareholder. Upon the death of a Shareholder
("Decedent"), all of the Shares owned by the Decedent (the "Decedent's Shares"),
after giving effect to the rights and obligation of the Remaining Shareholders
to purchase the Decedent's Shares, as set forth in the Cross-Purchase Agreement,
shall be purchased by the Corporation from the Decedent's legal representative
(the "Representative") at the price and on the terms set forth in Articles 5, 6,
and 7 hereof.
4.2. Put and Call Options in the Event of Permanent Disability. Upon a
Shareholder (the "Disabled Shareholder") becoming Permanently Disabled (as
hereinafter defined), the Remaining Shareholders shall have an option to
purchase (the "Call Option") all of the Shares owned by the Disabled Shareholder
or the Disabled Shareholder's Legal Representative for a period of ninety (90)
days following the Effective Date of Permanent Disability (as defined below) at
the price and on the terms set forth in Articles 5, 6 and 7 hereof, which option
shall be exercisable by the Remaining Shareholders within the aforesaid
Remaining Shareholders' option period upon written notice to the Disabled
Shareholder or the Disabled Shareholder's Legal Representative and the
Corporation. In the event that more than one of the Remaining Shareholders
elects to purchase the Disabled Shareholder's or the Disabled Shareholder's
Legal Representative's Shares, then unless otherwise agreed by the Remaining
Shareholders, each electing Remaining Shareholder must purchase only that
percentage of such Shareholder's Shares as is equal to his proportionate
ownership of all of the electing Remaining Shareholders' then respective Shares.
If the Remaining Shareholders fail to exercise such option or indicate a desire
to purchase only a portion of the Shares available for purchase, (i) the
Corporation shall have a Call Option regarding, and (ii) the Disabled
Shareholder or the Disabled Shareholder's Legal Representative shall have the
option to cause the Corporation to purchase (the "Put Option"), such Shares as
the Remaining Shareholders have elected not to purchase for a period of nine (9)
months following termination of the Remaining Shareholders' option period
described in this Section 4.2 at the price and on the terms set forth in
Articles 5, 6 and 7 hereof, which options shall be exercisable at any time
within the aforesaid option period upon written notice to the Disabled
Shareholder or the Disabled Shareholder's Legal Representative and the
Corporation, as the case may be. Notwithstanding the foregoing, the Put Option
shall not be exercisable by the Disabled Shareholder if he is deemed Permanently
Disabled by reason of his failure to submit to an examination pursuant to
Section 4.3(b) hereof.
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In the event the Disabled Shareholder or the Disabled Shareholder's
Legal Representative, as the case may be, does not exercise the Put Option and
the Remaining Shareholders and/or the Corporation does not exercise the Call
Option, the Disabled Shareholder or the Disabled Shareholder's Legal
Representative, as the case may be, shall hold the Disabled Shareholder's Shares
not so purchased subject to the terms, conditions and provisions of this
Agreement.
4.3. Definition of Permanent Disability. A Shareholder shall be deemed to
be "Permanently Disabled" upon the first to occur of the following events:
(a) if by reason of injury, sickness or other incapacity he is unable,
for a period of six (6) consecutive months or for six (6) months during any nine
(9) consecutive month period, to discharge his regular duties and
responsibilities as an employee, officer and/or director of the Corporation. If
the parties shall at any time be unable to agree on whether a Shareholder is or
has been so disabled, the Corporation and the Shareholder shall promptly and
jointly appoint a medical doctor or if they are unable to so agree, they shall
each promptly appoint a medical doctor to make such determination, and the
collective decision of such medical doctors shall be binding on all parties
hereto. If such doctors are unable to agree, they shall promptly appoint a third
medical doctor to make such determination, and the decision of such third
medical doctor shall be binding on all parties hereto; or
(b) the failure or refusal of a Shareholder to submit to any
examination or to appoint a medical doctor pursuant to subsection (a) of this
Section 4.3 within sixty (60) days after the date on which the Shareholder
receives a notice from the Remaining Shareholders to do so; or
(c) the adjudication of such Shareholder as an incompetent or a
disabled person by a court of competent jurisdiction.
4.4 Definition of Effective Date of Permanent Disability. If a Shareholder
is deemed to be Permanently Disabled pursuant to Section 4.3 hereof, then the
"Effective Date of Permanent Disability" shall be the first to occur of the
following:
(a) the date upon which the examining doctor(s) shall determine that
the Shareholder is Permanently Disabled; or
(b) the sixtieth (60th) day immediately succeeding the day on which a
Shareholder receives a notice from the Corporation to submit to an examination
pursuant to Section 4.3(a) hereof, if the Shareholder fails or refuses to submit
to such examination or fails or refuses to appoint a medical doctor; or
(c) the sixtieth (60th) day immediately succeeding the date of the
adjudication described in Section 4.3(c) hereof unless prior to the expiration
of such period the adjudication has been reversed; or
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(d) the first day of the seventh (7th) consecutive month or the first
day of the seventh (7th) month during any nine (9) consecutive month period of
the Shareholder's inability to perform his regular duties and responsibilities
as an employee, officer and/or director of the Corporation.
4.5. Put and Call Option in Event of Termination of Employment of
Shareholder. If a Shareholder's employment terminates (the "Terminating
Shareholder") other than for reason of his death or his becoming Permanently
Disabled, including without limitation if he is terminated for Cause (as defined
below), the Remaining Shareholders shall have a Call Option to purchase all of
the Shares owned by the Terminating Shareholder for a period of ninety (90) days
following cessation of employment at the price and on the terms set forth in
Articles 5, 6 and 7 hereof, which option shall be exercisable by the Remaining
Shareholders within the aforesaid Shareholders' option period upon written
notice to the Terminating Shareholder and the Corporation. In the event that
more than one of the Remaining Shareholders elects to purchase the Terminating
Shareholder's Shares, then unless otherwise agreed by the Remaining
Shareholders, each electing Remaining Shareholder must purchase only that
percentage of such Shareholder's Shares as is equal to his proportionate
ownership of all of the electing Remaining Shareholders' then respective Shares.
If the Remaining Shareholders fail to exercise such option or indicate a desire
to purchase only a portion of the Shares available for purchase, the Corporation
shall have a Call Option and the Terminating Shareholder shall have a Put Option
for such Shares as the Remaining Shareholders have elected not to purchase for a
period of nine (9) months following termination of the Remaining Shareholders'
option period described in this Section 4.5 at the price and on the terms set
forth in Articles 5, 6 and 7 hereof, which option shall be exercisable by the
Corporation or the Terminating Shareholder, as the case may be, at any time
within the aforesaid option period upon written notice to the Terminating
Shareholder or the Corporation, as the case may be.
In the event the Terminating Shareholder does not exercise the Put
Option and the Remaining Shareholders and/or the Corporation does not exercise
the Call Option, the Terminating Shareholder shall hold his Shares not so
purchased subject to the terms, conditions and provisions of this Agreement.
4.6. Definition of Cause. As used herein "Cause" shall mean: (i) commission
of any dishonest act by a Shareholder in connection with his or her employment
by the Corporation or any act of willful misconduct which has affected or can be
reasonably expected to affect the business or reputation of the Corporation in a
materially adverse manner; (ii) diversion of any material corporate opportunity
of the Corporation for the Shareholder's direct or indirect benefit; or (iii)
commission by the Shareholder of any wrongful act which constitutes cause for
dismissal of a corporate officer or employee under applicable law.
Notwithstanding the previous sentence, if "Cause" is defined in the Terminating
Shareholder's Employment Agreement, the definition set forth in such Employment
Agreement shall apply for purposes of this Agreement.
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ARTICLE
5
DETERMINATION OF THE PURCHASE PRICE
-----------------------------------
5.1. Purchase Price. The parties hereto recognize the problems relative to
determining the value of the Corporation. As a result, the parties hereto agree
that subject to the terms of Section 5.5 hereof, the purchase price ("Purchase
Price") for each Share to be purchased pursuant to Articles 3 or 4 hereof shall
be the greatest of the following amounts:
(i) Six and 34/100 Dollars ($6.34) per Share;
(ii) two (2) times the Book Value (as defined below) of the
Corporation divided by the total number of Shares outstanding as of the
date of the Decedent's death; and
(iii) an amount equal to: (a) five (5) times the Corporation's EBITDA
(as defined below), minus (b) the principal balance of the Corporation's
interest bearing debt as of the date of the Decedent's death, divided by
(c) the total number of Shares outstanding as of the date of the Decedent's
death;
The Purchase Price determined in the manner set forth above shall be conclusive
and binding on the parties hereto.
5.2. Book Value. As used herein, the term "Book Value" of the Corporation
means the total Shareholder's equity as reflected on the Corporation's balance
sheet as of the last day of the Corporation's fiscal year immediately preceding
the date of the Decedent's death, determined by the certified public accounting
firm regularly engaged by the Corporation ("Public Accountants") in accordance
with generally accepted accounting principles applied on a basis consistent with
that of prior years and using the FIFO method of accounting for inventories. The
Book Value when certified in writing by the Public Accountants shall be binding
and conclusive on the Decedent's estate, the Representative and all other
parties concerned.
5.3. EBITDA. As used herein, the term "EBITDA" shall mean an amount equal
to the average net income of the Corporation for the Fiscal Period (as defined
below) (i) using the FIFO method of accounting for inventories; and (ii) before
deducting interest, income taxes, depreciation and amortization. The term
"Fiscal Period" shall mean (y) if the event (the "Event") which triggers the
purchase and sale hereunder occurs during the first eight (8) months of any
given fiscal year of the Corporation, the three (3) consecutive fiscal years of
the Corporation immediately preceding the fiscal year in which the Event occurs,
and (z) if the Event occurs during the last four (4) months of any given fiscal
year of the Corporation, the three (3) consecutive fiscal years of the
Corporation ending with the fiscal year in which the Event occurs.
5.4 Changes in EBITDA Multiplier. On or about each anniversary of the date
hereof, or at such other time as is agreeable to them, the Shareholders and the
Corporation shall review
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the multiplier stated in Section 5.1(iii) hereof to determine whether or not
such multiplier should be amended upon the Requisite Vote of the Shareholders
and agreement by the Corporation, it being the intention of the parties that the
formula accurately reflects the fair value of the Corporation based upon all
relevant facts and circumstances at the time such matter is being considered.
5.5. Purchase Price of Shares in Event of Termination of Shareholder for
Cause. The Purchase Price to be paid for the Shares to be purchased upon the
termination of a Shareholder for Cause (as defined in Section 4.6 hereof) shall
be an amount per Share equal to the lesser of the Purchase Price determined in
accordance with Section 5.1(i), (ii) or (iii) hereof.
ARTICLE
6
PAYMENT OF THE PURCHASE PRICE AND OTHER MATTERS
-----------------------------------------------
6.1. Payment. The Purchase Price for the Shares purchased hereunder shall
be paid in full in cash at the closing, except that at the option of each
purchasing party, up to sixty percent (60%) of the Purchase Price may be
deferred as provided herein, provided that at least forty (40%) of the Purchase
Price is paid in cash at closing. Notwithstanding the foregoing, in the event
the selling Shareholder is someone other than Sloan, the amount of cash to be
paid to him at the closing shall not be less than the amount originally paid by
such Shareholder for his Shares being sold, which for Andrade, Funk and Buffett
is Six and 34/100 Dollars ($6.34) per Share.
6.2. Promissory Note. The deferred portion of the Purchase Price shall be
evidenced by a promissory note ("Note") of the purchasing party made payable to
the order of the selling party. The Note shall be in the form of Exhibit "A"
attached hereto and shall be dated as of the closing. Except as otherwise set
forth below, the principal balance shall be paid over a time not exceeding sixty
(60) months and each installment of the principal balance shall include
interest, accruing from the date of the Note, at a rate announced from time to
time by the LaSalle National Bank as its prime rate (the "Interest Rate").
6.3 Collateral. The Note shall be secured by a pledge of all of the Shares
being purchased by that purchasing party. Any and all documents reasonably
necessary for purposes of perfecting a security interest in all of the purchased
Shares shall be executed by the purchaser including a pledge agreement
containing, among other provisions, a third party escrow for the Shares, which
pledge agreement shall be subordinated to the LaSalle Pledge Agreement and the
Sloan Pledge Agreements. Unless and until an Event of Default (as defined in the
Note) occurs, the purchaser of the Shares shall have all the rights of the owner
thereof, including without limitation the right to vote and the right to receive
dividends and other distributions. Following an Event of Default, the pledgee of
the Shares shall have all the rights of the owner thereof, provided that any
dividends or distributions made pursuant to Section 2.5(b) of this Agreement
with respect to the fiscal year in which the Event of Default occurs shall be
allocated among the
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purchaser and the pledgee of the Shares in the same proportion as the tax
liability with respect to the income of the Corporation is allocated among them.
6.4. Guaranteed Indebtedness. If at the time of a purchase of Shares
pursuant to Article 4 hereof, the Corporation has outstanding indebtedness which
is personally guaranteed by certain of the Shareholders ("Guaranteed Debt") (it
being understood by the Shareholders that Buffett shall not at any time
personally guarantee any such indebtedness), each of the Remaining Shareholders
who has personally guaranteed such indebtedness agrees to use his good faith
efforts to obtain the release of the selling Shareholder's personal guaranty of
the Guaranteed Debt, provided that (i) such Remaining Shareholders shall not be
required to offer a pledge of his residence or his spouse's guaranty in order to
secure such release, and (ii) such Remaining Shareholders' actual ability to
secure such release shall not be a condition of closing the sale and purchase
under Article 4 hereof. Notwithstanding the foregoing, the Remaining
Shareholders shall have no duty or obligation to attempt to obtain the release
of a selling Shareholder who was terminated by the Corporation for Cause.
ARTICLE
7
THE CLOSING
-----------
7.1. Location. Unless otherwise agreed by the parties, the closing of the
sale and purchase of the Shares under Article 3 or 4 hereof shall take place at
such location as the parties to such sale shall agree upon.
7.2. Time.
(a) Article 3 Transfer. In the case of a purchase under Article 3,
the closing shall take place in accordance with the terms of the Notice,
provided that such closing shall not occur earlier than thirty (30) days after
the expiration of (i) the Corporation's Option Period if the Corporation elects
to purchase the Shares, or (ii) the Remaining Shareholders' Options Period if
the Shares are to be purchased by the Remaining Shareholders in addition to or
in place of the Corporation.
(b) Article 4 Transfer. In the case of a purchase of Shares under
Article 4, the closing shall take place: (i) within thirty (30) days after the
expiration of the applicable option periods under the Cross-Purchase Agreement,
or (ii) within ninety (90) days after the determination of the Purchase Price of
the selling Shareholder's Shares, for purposes of Sections 4.2 and 4.5 hereof.
7.3. Execution and Delivery of Documents. Upon the closing of the sale
and purchase, the selling Shareholder and the Remaining Shareholders shall
execute and deliver to each other the various documents which shall be required
to carry out their undertakings
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hereunder including without limitation, the payment of cash and the execution
and delivery of the Note and any collateral instruments.
7.4. Resignation as Officer and/or Director. Upon the closing of the sale
and purchase, the selling Shareholder shall resign as an officer and/or director
of the Corporation.
ARTICLE
8
TERMINATION OF AGREEMENT
------------------------
8.1. Events Causing Termination. This Agreement and all restrictions on
transfer created hereby shall terminate on the occurrence of any of the
following events:
(a) Upon the adoption of a plan of dissolution of the Corporation,
provided said plan is carried out diligently and all assets remaining after
payment of or provision for liabilities are distributed to the Shareholders
within a reasonable time thereafter; or
(b) The execution of a written instrument to that effect signed by
Shareholders owning all of the outstanding Shares entitled to vote; or
(c) Permanent cessation of the business of the Corporation; or
(d) The sale of substantially all of the assets or business of the
Corporation; or
(e) A single Shareholder becoming the legal and beneficial owner of
all then issued and outstanding Shares; or
(f) A Public Offering.
8.2. Effect of Termination. The termination of this Agreement for any
reason shall not effect any right or remedy existing hereunder prior to the
effective date of such termination.
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ARTICLE
9
MISCELLANEOUS
-------------
9.1. Piggyback Registration Rights. The Corporation agrees that at any time
during the term of this Agreement, if the Corporation shall seek a Public
Offering, each Shareholder shall be notified and shall be entitled to elect to
have included in such proposed registration, without cost or expense, such
number of Shares as the underwriter for the offering shall permit; provided,
however, that in the event the underwriter shall permit less than all of the
Shares to be registered the number of shares included in such registration shall
be reduced on a pro rata basis among the Shareholders (the "Piggy-Back Rights").
In the event of such a proposed registration, the Corporation shall furnish the
Shareholders with no less than thirty (30) days written notice prior to the
proposed filing of the registration statement. Such notice shall continue to be
given by the Corporation to such Shareholders for each proposed registration by
the Corporation until such time as all of the Shares have been registered. Such
Shareholders shall exercise their Piggy-Back Rights by giving written notice
within twenty (20) days of the receipt of the Corporation's notice of intention
to file a registration statement.
9.2. Replacement of Chief Executive Officer Upon the Death of Sloan. In the
event of the death of Sloan at a time when Sloan shall be serving as Chief
Executive Officer, the person holding the office of President at such time,
shall also hold the office and assume the duties of Chief Executive Officer
until the next election of officers of the Corporation.
9.3. Board of Directors Deadlock. In the event of a deadlock of the Board
of Directors, the deadlock shall be resolved by the Shareholder holding greater
than fifty (50%) percent of the outstanding Shares entitled to vote; provided,
however, that in the event no Shareholder holds such percentage, then the
deadlock shall be resolved by submitting the issue on which the Board is
deadlocked to a vote of the holders of Shares entitled to vote. In such event,
each Shareholder agrees to vote his Shares in the same way as the Shareholder
holding the largest percentage of Shares entitled to vote.
9.4. Termination of Employment; Reduction in Salary of a Shareholder-
Employee.
(a) In order to terminate the employment of any Shareholder either (i)
for Cause, or (ii) as a result of a disability, the Board of Directors must act
by the unanimous vote of all Directors other than the Director who is the
subject of the vote. In all other instances, the Requisite Vote of the
Shareholders shall be required in order to terminate the employment of any
Shareholder.
(b) In no event may the annual salary of any Shareholder who is also
an employee of the Corporation be reduced below the base salary stated in that
Shareholder's Employment Agreement with the Corporation, without such
Shareholder's express written consent.
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9.5. Approval of Certain Matters by Board of Directors. In addition to and
not in limitation of any provision of the Corporation's Certificate of
Incorporation, By-Laws or the DGCL, the following actions by the Corporation
shall require the approval of a majority of the Board of Directors:
(a) making any capital expenditures in any given fiscal year which, in
the aggregate, exceed the budgeted amount for capital expenditures for that
fiscal year as approved by the Board;
(b) entering into operating leases in any given fiscal year which, in
the aggregate, exceed the budgeted amount for operating leases for that fiscal
year as approved by the Board;
(c) removal or significant change in the duties and responsibilities
of an officer who is also a Shareholder;
(d) declaration of a stock or cash dividend;
(e) exercise of any Call Option or other right of purchase under this
Agreement;
(f) incurring, guaranteeing or otherwise becoming liable for
indebtedness for borrowed money in an amount in excess of $500,000, or any
action to prepay any existing indebtedness by an amount in excess of $500,000;
(g) the determination to change the Corporation's independent auditing
firm; and
(h) the decision to employ any person or terminate the employment of
any employee of the Corporation having an annual salary of greater than
$85,000.00.
9.6. Board of Directors. The Board of Directors of the Corporation shall
consist of four (4) persons. So long as each of Sloan, Andrade, Funk and Buffett
is a Shareholder, he shall serve on the Board of Directors. The vacancy
resulting from the death, resignation, or removal of a director shall be filled
by the unanimous decision of the directors then in office. Any director elected
to fill a vacancy shall have the same remaining term as that of his predecessor.
At the next election, the position shall be filled by the unanimous decision of
the Shareholders and until such decision is reached, that Board seat shall
remain vacant.
9.7. Effect of Improper Transfer. Except as otherwise permitted under the
Cross Purchase Agreement or the Contribution Agreement, if a transfer or
attempted transfer violates any provision of this Agreement or if the
transferor, after the transfer, reacquires all or any portion of the transferred
Shares, such transfers or attempted transfers shall be null and void and
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the Shares transferred or attempted to be transferred shall remain subject to
this Agreement as if no transfer had been made.
9.8. Voting of Shares. The Representative, Disabled Shareholder, Disabled
Shareholder's Legal Representative, Offering Shareholder or Terminating
Shareholder shall have no vote regarding any given Corporation's option to
purchase Shares under this Agreement.
9.9. Entire Agreement. Except for the Cross Purchase Agreement, the terms,
conditions and covenants contained herein are the full and complete terms of the
agreement between the parties hereto regarding the subject matter hereof and
supersede any and all prior agreements by and among the Corporation and the
Shareholders concerning the ownership, sale or other disposition of the Shares.
No alterations, amendments or modifications of such terms shall be binding on
the parties hereto unless reduced to writing and approved by the Requisite Vote
of the Shareholders, provided that Section 5.1(i) hereof may not be amended or
modified unless approved by the affirmative vote of the holders of all Shares
entitled to vote.
9.10. Binding Effect. This Agreement shall be binding not only upon the
parties hereto, but upon their respective heirs, legal representatives,
successors and assigns. All persons bound hereby shall execute such instruments
and perform such acts as may be reasonably necessary or desirable to effectuate
the terms and provisions of this Agreement.
9.11. Adoption by Corporation. The Shareholders hereto will cause the Board
of Directors to adopt appropriate minutes and resolutions recognizing,
confirming, ratifying and adopting the terms of this Agreement and any
amendments to the By-Laws consistent with the provisions herein.
9.12. Reference in Will. Each Shareholder shall make reference to this
Agreement in any Will or Codicil that he may hereafter execute and shall direct
the executor therein to comply with all of its terms and provisions.
9.13. Notices. Any and all notices given in connection with this Agreement
shall be deemed adequately given only if in writing and personally delivered,
sent by first class registered or certified mail, postage prepaid, return
receipt requested; sent by telefacsimile, provided a hard copy is mailed on that
date to the party for whom such notices are intended or sent by other means at
least as fast and reliable as first class mail. A written notice shall be deemed
to have been given to the recipient party on the earlier of (i) the date it
shall be delivered to the address required by this Agreement; (ii) the date
delivery shall have been refused at the address required by this Agreement;
(iii) with respect to notices sent by mail, the date as of which the postal
service shall have indicated such notice to be undelivered at the address
required by this Agreement, or (iv) with respect to a telefacsimile, the date on
which the telefacsimile is sent. Any and all notices referred to in this
Agreement, or which any party desires to give to the other, shall be addressed
as follows:
16
<PAGE>
Name Address
To the Corporation The GSI Group, Inc.
P.O. Box 20
Assumption, Illinois 62510
Attn: John C. Sloan, CEO
with a copy to John Funk, Executive
Vice President and General Counsel
To Sloan John C. Sloan
74 Allen Bend Drive
Decatur, Illinois 62521
To Andrade Jorge Andrade
3209 Falcon Point
Springfield, Illinois 62707
To Funk John Funk
777 South Monroe Street
Decatur, Illinois 62522
To Buffett Howard Buffett
407 Southmoreland Place
Decatur, Illinois 62521
with a copy of all notices Sachnoff & Weaver, Ltd.
at the same time to: 30 South Wacker Drive
Suite 2900
Chicago, Illinois 60606
Attn: Stewart Dolin, Esq.
or to such other address as the person to whom notice is to be given may have
furnished to the other in writing in accordance herewith. A communication given
by any other means shall be deemed duly given when actually received by the
addressee.
9.14. Specific Performance. The Shares cannot be readily purchased or sold
in the open market, and for that reason, among others, the parties will be
irreparably damaged in the event that this Agreement is not specifically
enforced. Should any dispute arise concerning whether a proposed sale or
disposition of the Shares would violate this Agreement, the parties agree that
an injunction may be issued restraining any sale or disposition pending the
determination of such controversy. In the event of any controversy concerning
the right or obligation to purchase or sell any of the Shares, such right or
obligation shall be enforceable in a court of equity by a decree of specific
performance. Such remedy shall, however, be cumulative and not exclusive,
17
<PAGE>
and shall be in addition to any other remedy which the parties may have at law,
in equity or otherwise.
9.15. Construction of Terms. Unless otherwise specifically provided, a
reference to a particular "section", "Section", or "Article" shall mean the
section, Section, or Article in this Agreement.
9.16. Governing Law. This Agreement shall be interpreted, governed and
construed in all respects by the internal laws of the State of Illinois, and any
action commenced to enforce any of the provisions hereof shall have as its venue
Christian County, Illinois.
9.17. Payment of Legal Costs and Expenses. In the event any action is
commenced to challenge or enforce the terms and provisions hereof, the party who
is successful in such action based upon a final, unappealable court order, shall
be reimbursed by the unsuccessful party for his fee, costs and expenses
(including without limitation reasonable attorneys' and accountants' fees, costs
and expenses) incurred in connection with the legal proceeding.
9.18. Gender. Unless the context otherwise requires, any pronouns, wherever
used herein, shall include the corresponding masculine, feminine or neuter
pronouns and the plural shall include the singular, and vice versa.
9.19. Headings. Article and paragraph headings are included herein solely
for convenience and shall not be construed to modify or explain any of the
substantive provisions hereof.
18
<PAGE>
IN WITNESS WHEREOF, the Corporation have caused this Agreement to be
executed and attested by its duly authorized officers, and the Shareholders have
signed their names, all on the day and year first above written.
The GSI Group, Inc.
By: /s/ John C. Sloan
----------------------------
Title: CEO
-------------------------
/s/ John C. Sloan
--------------------------------
John C. Sloan
/s/ Jorge Andrade
--------------------------------
Jorge Andrade
/s/ John Funk
--------------------------------
John Funk
/s/ Howard Buffett
--------------------------------
Howard Buffett
19
<PAGE>
Exhibit 10.15
FIRST AMENDMENT TO
STOCK RESTRICTION AND BUY-SELL AGREEMENT
This First Amendment to Stock Restriction and Buy-Sell Agreement (the
"Amendment") is made as of the 15th day of July, 1996, day of October, 1996 by
and between John C. Sloan ("Sloan"), Jorge Andrade ("Andrade"), John Funk
("Funk") and Howard Buffett ("Buffett"), and The GSI Group, Inc., a Delaware
corporation (the "Corporation").
R E C I T A L S:
----------------
A. The parties hereto are parties to that certain Stock Restriction and
Buy-Sell Agreement dated as of June 6, 1996 (the "Agreement"), which Agreement
imposes certain rights and restrictions on the Shareholders in connection with
the sale or disposition of their Shares.
B. The parties hereto desire to amend the Agreement in accordance with
the terms and conditions set forth below.
NOW, THEREFORE, for and in consideration of the above premises and the
mutual covenants and agreements hereinafter contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. The Recitals are incorporated herein and constitute covenants,
representations and warranties of the Shareholders. All capitalized terms
used herein shall have the meanings ascribed to them in the Agreement
unless the context in which such terms are used clearly indicates a
contrary intention.
2. Section 5.1 of the Agreement is hereby amended by deleting the
words "Decedent's death" wherever such words appear in subsection (ii) and
(iii) thereof and substituting in place thereof the words "Event (as
defined below)".
3. Section 5.2 of the Agreement is hereby amended by deleting the
words "Decedent's death" in the third line thereof and substituting in
place thereof the words "Event (as defined below)". In addition, the words
"on the Decedent's estate, the Representative and all other" shall be
deleted in the last line of said Section and substituting in place thereof
the words "on all."
4. A Section 6.5 is hereby added to the Agreement, which states as
follows:
<PAGE>
"6.5 Prepayment of Note. If following the death of a Former
Shareholder (as defined below), the Corporation receives payment (whether
as a contribution to its capital or otherwise) by the Trustee (as defined
in the Cross Purchase Agreement) or the Remaining Shareholders of the
proceeds of one or more insurance policies on the life of the Former
Shareholder, the Corporation shall upon receipt of such proceeds prepay to
the extent thereof the unpaid balance, if any, of principal plus accrued
interest under an outstanding Note payable by the Corporation to the Former
Shareholder for the Former Shareholder's Shares. As used herein, the term
"Former Shareholder" means any person who previously owned voting Shares,
but who, at the time of his death, no longer owns Shares."
5. Exhibit "A" to the Agreement is hereby amended and restated in the
form of Amended and Restated Exhibit "A" attached hereto.
6. Except as expressly amended by this Amendment, the Agreement shall
remain unchanged and in full force and effect.
The GSI Group, Inc.
By: /s/ John C. Sloan
------------------------------
Title: CEO
---------------------------
/s/ John C. Sloan
----------------------------------
John C. Sloan
/s/ Jorge Andrade
----------------------------------
Jorge Andrade
/s/ John Funk
----------------------------------
John Funk
/s/ Howard Buffett
----------------------------------
Howard Buffett
2
<PAGE>
Exhibit 10.17
THE GSI GROUP, INC.
STOCK RESTRICTION AND BUY-SELL AGREEMENT
NON-VOTING SHARES
THIS STOCK RESTRICTION AND BUY-SELL AGREEMENT is made as of the 1st day of
January, 1997 by and between The GSI Group, Inc., a Delaware corporation (the
"Corporation"), John C. Sloan ("Sloan"), Jorge Andrade ("Andrade"), John Funk
("Funk") and Howard Buffett ("Buffett") (Sloan, Andrade, Funk and Buffett are
hereinafter referred to collectively as the "Voting Shareholders"), and the
persons identified on Exhibit A attached hereto (the "Non-Voting Shareholders").
R E C I T A L S
---------------
The Voting Shareholders are owners and holders of all of the issued and
outstanding voting shares ("Voting Shares") of common stock of the Corporation.
The Non-Voting Shareholders are owners and holders of issued and
outstanding non-voting shares ("Shares") of common stock of the Corporation.
The parties hereto believe that in the interest of their continued success,
it is desirable to maintain continuity in the management, policies and ownership
of the Corporation, provide for the purchase of Shares upon the occurrence of
certain contingencies and provide certain other agreements as more fully set
forth herein.
NOW, THEREFORE, for and in consideration of the above premises and the
mutual covenants and agreements hereinafter contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE
1
INCORPORATION OF RECITALS AND DEFINITIONS
-----------------------------------------
1.1 Incorporation of Recitals. The Recitals are incorporated herein and
constitute covenants, representations and warranties of the Shareholders.
1.2 Definitions. For purposes of this Agreement:
(a) The term "and/or" shall mean one or the other or both, or any one
or more or all, of the things or persons in connection with which the
conjunction is used.
<PAGE>
(b) The term "Approved Sale" shall mean the sale of the Corporation to
an Independent Third Party (whether by merger, consolidation, sale of all or
substantially all of its assets or sale of a majority of the Voting Shares)
approved by the Corporation's Board of Directors and/or the Controlling
Shareholders.
(c) The term "Controlling Shareholders" shall mean the Voting
Shareholders owning more than fifty percent (50%) of the outstanding voting
shares of the Corporation's stock.
(d) The term "Independent Third Party" means any person who,
immediately prior to the contemplated transactions, does not own in excess of 5%
of the Voting Shares, who is not controlling, controlled by or under common
control with any such 5% owner of the Voting Shares, and who is not the spouse
or descendant (by birth or adoption) of any such 5% owner.
(e) The term "Non-Voting Shareholder" shall mean any person or entity
that at any time may become a party hereto by reason of his, her or its
ownership of Shares.
(f) The term "Shares" shall mean all shares of the Corporation's non-
voting common stock now owned or hereafter acquired by any Shareholder,
including but not limited to, newly authorized non-voting shares, non-voting
shares issued out of authorized but unissued stock, non-voting shares issued or
credited in connection with any stock dividend, stock split, or other capital
readjustment, as well as any voting trust certificates (there being none at this
date) representing any non-voting shares issued by the Corporation and owned by
the Non-Voting Shareholder which are part of any voting trust or similar
agreement.
(g) The term "Shareholders" and/or "Shareholder" shall mean the Voting
Shareholders, Non-Voting Shareholders and/or any other person or entity that at
any time may become a party hereto by reason of his, her or its ownership of
Shares and/or voting shares of the Corporation's stock.
(h) The term "Voting Shareholder" shall mean any person or entity that
is the record owner of Voting Shares.
ARTICLE
2
RESTRICTION ON SHARES
---------------------
2.1 Prohibition on Transfer. Except as (i) expressly permitted herein; or
(ii) provided under a certain pledge agreement between LaSalle National Bank and
the Shareholders (the "LaSalle Pledge Agreement"), and pledge agreements between
the Shareholders and each of Larry Sloan, Thomas G. Sloan and James E. Sloan
(collectively, the "Sloan Pledge Agreements"), none of the Non-Voting
Shareholders shall at any time sell, pledge, hypothecate, transfer, encumber,
assign, give away or in any way dispose of any Shares now owned or
2
<PAGE>
hereafter acquired by him, nor shall such Shares be transferable, voluntarily or
involuntarily, by operation of law or otherwise, except in strict compliance
with the covenants, terms and conditions set forth in this Agreement. Any
attempt to do so in violation of this Agreement shall not be recognized by the
Corporation and shall be null and void and of no force or effect whatsoever.
The Shareholders acknowledge and agree that the rights afforded Sloan pursuant
to the terms of any documents and/or agreements pertaining to the sale of Shares
by Sloan to any given Non-Voting Shareholder shall, with respect to the Shares
acquired by such Non-Voting Shareholder from Sloan, supersede the rights and
obligations of the parties hereunder.
2.2 Restriction on Certificates. The Corporation shall cause to be placed
on each certificate of its Shares which may now or hereafter be issued to a Non-
Voting Shareholder (except certificates evidencing Shares sold free of the
restrictions of this Agreement), a notice in the following form:
"The shares of stock evidenced by this Certificate are subject to the terms
and conditions of a certain Stock Restriction and Buy-Sell Agreement, dated
as of January 1, 1997 ("Agreement"), between the Corporation and the
Shareholders. A copy of the Agreement is on file at the offices of the
Corporation, reference to all the terms and conditions thereof being hereby
made. No sale or transfer of the Shares evidenced hereby may be effected,
except pursuant to the terms and conditions of the Agreement."
If such legend is placed on the reverse side rather than the face of any such
certificate, there shall be placed on the face of such certificate a legend in
the following form:
"For restrictions on transfer, see notice on reverse side hereof."
2.3 Wrongful Transfer. Subject to Sections 2.1, no sale, pledge,
hypothecation, transfer, encumbrance, assignment, gift or other disposition by a
Non-Voting Shareholder of any of his Shares shall be effective, unless and
until: (i) he has first complied with all the provisions of this Agreement, and
(ii) such transferee shall take such Shares subject to the terms of this
Agreement, shall agree in writing to become a party to this Agreement and to be
bound by all of the terms, conditions and provisions hereof. If a Non-Voting
Shareholder fails to comply with this Agreement, the Voting Shareholders and/or
the Corporation shall have the right to compel such Non-Voting Shareholder or
any transferee to transfer and deliver his or its Shares in accordance with the
provisions of this Agreement.
2.4 Maintenance of S Corporation Status.
(a) Each Non-Voting Shareholder agrees that he will take all action
necessary to permit the Corporation to retain its tax status an S Corporation
("S Corporation") under Subchapter S (Section 1361 et seq.) of the Internal
Revenue Code of 1986, as amended (the "Code"), including but not limited to, the
execution and delivery of any and all consents and other documents required at
any time for the continuance of S Corporation status, or required to carry out,
effectuate, implement or exercise any and all other elections available to, or
powers
3
<PAGE>
exercisable by, a corporation having elected S Corporation status. Unless and
until the Controlling Shareholders direct otherwise in writing, the Non-Voting
Shareholders shall not take any action which will cause the Corporation not to
be taxed as an S Corporation.
(b) Subject to the limitations of the Delaware General Corporation Law
("DGCL"), as long as the Corporation remains an S Corporation, each Shareholder
agrees to take all actions necessary to cause the Board of Directors of the
Corporation to declare and pay to the Shareholders dividends each year in an
amount not less than all federal and state income taxes, including but not
limited to estimated tax payments, payable by the Shareholders each year with
respect to the income of the Corporation, based upon the maximum marginal
federal and state individual income tax rates applicable to any Shareholder.
(c) Upon any transfer of the Shares permitted hereunder, the
Corporation may require arrangements reasonably satisfactory to it to assure
that any transferee shall take any and all action necessary to maintain the
election under Section 1362(a) of the Code.
2.5 Take-along Rights. The Controlling Shareholders agree that if they
sell or transfer, in the aggregate, a majority of the Voting Shares to a third
party, they will first give written notice (the "Take-along Notice") to the Non-
Voting Shareholders stating all of the material terms of the offer. Each of the
Non-Voting Shareholders may then participate pro rata in such transfer based on
his proportionate holdings of Shares in relation to the total number of
outstanding shares (both voting and non-voting) of the common stock of the
Corporation. If a Non-Voting Shareholder wishes to participate in such
transaction, he will give the Corporation and the Voting Shareholders written
notice within five (5) days of receipt of the Take-along Notice, and the sale
transaction will not close prior thereto. The foregoing notwithstanding, the
provisions of this Section 2.5 shall not apply to (i) any transfers of Voting
Shares among or between the Voting Shareholders and/or their respective family
members, in trust or otherwise, either during their lifetimes or after their
deaths, and (ii) the pledge or hypothecation of Voting Shares.
2.6 Drag-A-Long Rights. In the event of an Approved Sale, each of the
Non-Voting Shareholders agrees to sell his Shares on the terms and conditions
approved by the Corporation's Board of Directors and/or the Controlling
Shareholders. Each Non-Voting Shareholder will not exercise any statutory
dissenters' rights with regard to an Approved Sale and will take all necessary
and desirable actions in connection with the consummation of the Approved Sale.
The foregoing notwithstanding, the right of the Corporation and/or the
Controlling Shareholders to consummate any Approved Sale structured as a sale of
common stock is subject to the satisfaction of the condition that, upon the
consummation of the Approved Sale, each Non-Voting Shareholder will receive the
same form and amount of consideration per Share as the Voting Shareholders
receive for their Voting Shares, or if the Voting Shareholders are given an
option as to the form and amount of consideration to be received, the Non-Voting
Shareholders will be given the same option.
4
<PAGE>
ARTICLE
3
PURCHASE OF SHARES - RIGHT OF FIRST OFFER
-----------------------------------------
3.1 Notice of Transfer. If a Non-Voting Shareholder ("Offering
Shareholder") receives during his lifetime a bona fide offer ("Offer") to sell
or otherwise transfer any or all of his Shares ("Offered Shares") to any other
Non-Voting Shareholder, the Offering Shareholder shall give at least sixty (60)
days prior written notice to the Corporation and the Voting Shareholders of his
intention to so transfer his Shares (the "Notice"). The Notice shall state (i)
the number of Offered Shares; (ii) the name of the Non-Voting Shareholder who is
the proposed transferee (the "Transferee"); (iii) whether or not the transfer is
for valuable consideration and, if so, the consideration (the "Offered Price");
(iv) the date upon which the proposed transfer to the Transferee is to be
consummated; and (v) all other material terms of the proposed transfer. A copy
of any written agreement (whether executed or not) evidencing the Offer shall be
attached to the Notice.
3.2 Rights of First Offer. From and after the date of the Notice
("Notice Date"), the Voting Shareholders and the Corporation shall have options
to purchase the Offered Shares, upon the terms set forth in Section 3.3 hereof,
exercisable in the order of priority and within the time periods set forth
below:
(a) Within twenty-one (21) days after the Notice Date (the "Sloan's
Option Period"), Sloan shall have the option to acquire all or any portion of
the Offered Shares ("Sloan's Option"). Sloan shall exercise Sloan's Option, if
at all, by giving written notice to that effect to the Offering Shareholder, the
other Voting Shareholders and the Corporation within Sloan's Option Period.
(b) Within twenty one (21) days following the first to occur of (i)
the expiration of Sloan's Option Period without Sloan exercising his option or
(ii) Sloan's written notice to the Offering Shareholder, the other Voting
Shareholders and the Corporation that he will not purchase any or all of the
Offered Shares (the "Voting Shareholders' Option Period"), the Voting
Shareholders, other than Sloan, shall have the option to acquire all of the
Offered Shares not being purchased by Sloan (the "Voting Shareholders' Option").
In the event that one or more of such Voting Shareholders elects to purchase the
Offering Shareholder's Shares, then unless otherwise agreed, each electing
Voting Shareholder must purchase that percentage of the Shares offered by the
Offering Shareholder as is equal to his proportionate ownership of all of the
electing Voting Shareholders' Voting Shares. The Voting Shareholders shall
exercise the Voting Shareholders' Option, if at all, by giving written notice to
that effect to Sloan, the Corporation and the Offering Shareholder within the
Voting Shareholders' Option Period.
(c) Within fourteen (14) days following the first to occur of (i) the
expiration of the Voting Shareholders' Option Period without Sloan and/or the
other Voting Shareholders exercising their options; or (ii) written notice to
the Corporation that neither Sloan nor the other Voting Shareholders intend to
purchase all of the Offered Shares (the "Corporation's Option"),
5
<PAGE>
the Corporation shall have the option to acquire all of the Offered Shares not
being purchased by Sloan or the other Voting Shareholders. The Corporation shall
exercise the Corporation's Option, if at all, by giving written notice to that
effect to the Offering Shareholder and the Voting Shareholders within the
Corporation's Option Period.
The exercise of the aforesaid options must, in the aggregate, include all
of the Offered Shares or the exercise of such option(s) shall be null and void.
3.3 Purchase Price and Terms. In the event Sloan's Option, the Voting
Shareholders' Option and/or the Corporation's Option is exercised, the
party(ies) exercising such option(s) shall purchase the Offered Shares at the
lower of (i) the Offered Price or (ii) the Purchase Price (as hereinafter
defined) determined in accordance with Section 5.5 hereof, upon the same terms
and conditions provided in the Notice. The Closing of such purchase shall occur
in the mariner described in Section 7.2(a) hereof.
3.4 Failure to Exercise Rights of First Offer Options. If Sloan, the
Voting Shareholders and/or the Corporation fail to exercise their respective
Options in accordance with Section 3.2 hereof to purchase in the aggregate all
of the Offered Shares, the Offered Shares may be transferred to the Transferee
as provided in the Notice. The effectiveness of such transfer is conditioned
upon the Transferee then being a Non-Voting Shareholder immediately prior to
such transfer and his reaffirming in writing his agreement to be bound by all of
the terms, conditions and provisions hereof. If the transfer does not occur in
accordance with the terms disclosed in the Notice, such transfer shall be
automatically null and void without any further action being required on the
part of the Corporation or the Voting Shareholders, and any attempt to transfer
the Offered Shares thereafter without first complying with the terms of this
Article 3 shall be deemed a wrongful transfer within the meaning of Section 2.3
hereof.
ARTICLE
4
PURCHASE OF SHARES
------------------
4.1 Purchase Upon Death, Permanent Disability or Termination of
Employment of Non-Voting Shareholder. If a Non-Voting Shareholder dies (the
"Decedent"), becomes Permanently Disabled (as defined below) (the "Disabled
Shareholder"), or his employment by the Corporation terminates (the "Terminating
Shareholder") (a Decedent, Disabled Shareholder or Terminating Shareholder is
sometimes hereinafter referred to as a "Departed Shareholder"), the Shares owned
by the Departed Shareholder, shall be subject to the following rights and
obligations, and the Non-Voting Shareholders, for themselves and their
respective heirs, successors, representatives and assigns, agree as follows:
(a) Within sixty (60) days following: (i) the date of the Decedent's death,
(ii) the Effective Date of Permanent Disability (as defined below) of the
Disabled Shareholder, or (iii) the last date of employment of the Terminating
Shareholder, as the case may be ("Sloan's
6
<PAGE>
Purchase Option Period"), Sloan shall have the option to acquire all or any
portion of the Shares owned by the Departed Shareholder ("Sloan's Purchase
Option"), at the price and on the terms set forth in Articles 5, 6 and 7 hereof.
Sloan shall exercise Sloan's Purchase Option, if at all, by giving written
notice to that effect to the Departed Shareholder, the other Voting Shareholders
and the Corporation within Sloan's Purchase Option Period.
(b) Within thirty (30) days following the first to occur of (i) the
expiration of Sloan's Purchase Option Period without Sloan exercising his option
or (ii) Sloan's written notice to the Departed Shareholder, the other Voting
Shareholders and the Corporation that he will not purchase any or all of the
Departed Shareholder's Shares (the "Voting Shareholders' Purchase Option
Period"), the Voting Shareholders, other than Sloan, shall have the option to
acquire all of the Departed Shareholder's Shares not being purchased by Sloan
(the "Voting Shareholders' Purchase Option"), at the price and on the terms set
forth in Articles 5, 6 and 7 hereof. In the event that one or more of such
Voting Shareholders elects to purchase the Departed Shareholder's Shares, then,
unless otherwise agreed, each electing Voting Shareholder must purchase that
percentage of the Departed Shareholder's Shares as is equal to his proportionate
ownership of all of the electing Voting Shareholders' Voting Shares. The Voting
Shareholders shall exercise the Voting Shareholders' Purchase Option, if at all,
by giving written notice to that effect to Sloan, the Corporation and the
Departed Shareholder within the Voting Shareholders' Purchase Option Period.
(c) Subject to Section 4.2 hereof, the Corporation shall purchase, and the
Departed Shareholder or his legal representative shall sell, all of the Shares
owned by the Departed Shareholder which are not purchased by Sloan and/or the
other Voting Shareholders pursuant to Sections 4.1(a) or (b) above, at the price
and on the terms set forth in Articles 5, 6 and 7 hereof.
(d) Notwithstanding the foregoing provisions of this paragraph 4.1 but
subject in all events, however, to the rights and obligations to sell Shares
otherwise set forth herein, any Senior Terminating Shareholder (as defined
below) who resigns prior to January 1, 2002, may irrevocably elect to defer the
purchase and sale of his Shares (due to such termination of employment), such
that with respect to determining the Purchase Price for such Senior Terminating
Shareholder's Shares, the Event (as defined in paragraph 5.1 hereof) shall be
deemed to have occurred either on January 1, 2002 or on the fifth (5th)
anniversary of the last day of such Senior Terminating Shareholder's employment
by the Corporation. The Senior Terminating Shareholder shall give written
notice of such election to the Voting Shareholders and the Corporation within
thirty (30) days following the last day of his employment, which notice shall
express such irrevocable election and shall specify whether the Event shall be
deemed to occur on January 1, 2002 or on the fifth (5th) anniversary of the last
date of his employment. In such circumstance, Sloan's Purchase Option Period,
the Voting Shareholder's Purchase Option Period and the respective rights and
obligations of the Voting Shareholders, the Corporation and such Senior
Terminating Shareholder with respect to the purchase and sale of his Shares
shall pertain as if the date designated by such Senior Terminating Shareholder
for the Event was the last day of his employment. As used herein, the term
"Senior Terminating Shareholder" means a Terminating Shareholder who was either
(i) 62 years of age, or
7
<PAGE>
(ii) employed by the Corporation for a period of at least twenty (20) years, at
the time he first acquired Shares.
4.2 Termination of Employment for Cause. Notwithstanding the terms of
Section 4.1(c) above, if the Terminating Shareholder's employment by the
Corporation is terminating for Cause (as defined below), then the Corporation
shall not be obligated to purchase the Terminating Shareholder's Shares, and in
lieu of any such obligation, the Corporation shall have the option to acquire
all or any portion of the Terminating Shareholder's Shares not being purchased
by Sloan or the other Voting Shareholders pursuant to their respective options
as set forth above, on the terms set forth in Articles 5, 6 and 7 hereof. The
Corporation shall exercise such option, if at all, by giving written notice to
that effect to the Terminating Shareholder and the Voting Shareholders within
one hundred eighty (180) days following the first to occur of (i) the expiration
of Sloan's Purchase Option and the Voting Shareholders' Purchase Option without
them having exercised such options or (ii) Sloan's and the other Voting
Shareholders' written notice to the Corporation and the Terminating Shareholder
stating that they will not purchase the Terminating Shareholder's Shares. In the
event that neither Sloan, the other Voting Shareholders nor the Corporation
exercise their respective options to purchase the Shares of a Terminating
Shareholder whose employment is terminated for Cause, the Terminating
Shareholder, or his heirs, representatives, successors and assigns, shall hold
such Shares not so purchased subject to the terms, conditions and provisions of
this Agreement.
4.3 Definition of Permanent Disability. A Non-Voting Shareholder shall be
deemed to be "Permanently Disabled" upon the first to occur of the following
events:
(a) if by reason of injury, sickness or other incapacity he is unable,
for a period of six (6) consecutive months or for six (6) months during any nine
(9) consecutive month period, to discharge his regular duties and
responsibilities as an employee and/or officer of the Corporation. If the
parties shall at any time be unable to agree on whether a Non-Voting Shareholder
is or has been so disabled, the Corporation and the Non-Voting Shareholder shall
promptly and jointly appoint a medical doctor or if they are unable to so agree,
they shall each promptly appoint a medical doctor to make such determination,
and the collective decision of such medical doctors shall be binding on all
parties hereto. If such doctors are unable to agree, they shall promptly
appoint a third medical doctor to make such determination, and the decision of
such third medical doctor shall be binding on all parties hereto; or
(b) the failure or refusal of a Non-Voting Shareholder to submit to
any examination or to appoint a medical doctor pursuant to subsection (a) of
this Section 4.3 within sixty (60) days after the date on which the Non-Voting
Shareholder receives a notice from the Voting Shareholders and/or the
Corporation to do so; or
(c) the adjudication of such Non-Voting Shareholder as an incompetent
or a disabled person by a court of competent jurisdiction.
8
<PAGE>
4.4 Definition of Effective Date of Permanent Disability. If a Non-Voting
Shareholder is deemed to be Permanently Disabled pursuant to Section 4.3 hereof,
then the "Effective Date of Permanent Disability" shall be the first to occur of
the following:
(a) the date upon which the examining doctor(s) shall determine that
the Non-Voting Shareholder is Permanently Disabled; or
(b) the sixtieth (60th) day immediately succeeding the day on which
the Non-Voting Shareholder receives a notice from the Voting Shareholders and/or
the Corporation to submit to an examination pursuant to Section 4.3(a) hereof,
if the Non-Voting Shareholder fails or refuses to submit to such examination or
fails or refuses to appoint a medical doctor; or
(c) the sixtieth (60th) day immediately succeeding the date of the
adjudication described in Section 4.3(c) hereof unless prior to the expiration
of such period the adjudication has been reversed; or
(d) the first day of the seventh (7th) consecutive month or the first
day of the seventh (7th) month during any nine (9) consecutive month period of
the Non-Voting Shareholder's inability to perform his regular duties and
responsibilities as an employee and/or officer of the Corporation.
4.5 Definition of Cause. As used herein "Cause" shall mean one or more of
the following as determined by the Board of Directors in its sole discretion:
(i) commission of any dishonest act by a Non-Voting Shareholder in connection
with his employment by the Corporation or any act of willful misconduct which
has affected or can be reasonably expected to affect the business or reputation
of the Corporation in a materially adverse manner; or (ii) diversion of any
material corporate opportunity of the Corporation for the Non-Voting
Shareholder's direct or indirect benefit.
ARTICLE
5
DETERMINATION OF THE PURCHASE PRICE
-----------------------------------
5.1 Purchase Price. The parties hereto recognize the problems relative to
determining the value of the Corporation. As a result, the parties hereto agree
that subject to the terms of Section 5.5 hereof, the purchase price ("Purchase
Price") for each Share to be purchased pursuant to Articles 3 or 4 hereof shall
be the greatest of the following amounts:
(i) Six and 34/100 Dollars ($6.34) per Share;
(ii) two (2) times the Book Value (as defined below) of the
Corporation divided by the total number of shares (both voting and non-
voting) of the Corporation's
9
<PAGE>
stock outstanding as of the date of the event which triggers the purchase
and sale hereunder (the "Event"); and
(iii) an amount equal to: (a) five (5) times the Corporation's EBITDA
(as defined below), minus (b) the principal balance of the Corporation's
interest bearing debt as of the date of the Event, divided by (c) the total
number of shares (both voting and non-voting) of the Corporation's stock
outstanding as of the date of the Event.
The Purchase Price determined in the manner set forth above shall be conclusive
and binding on the parties hereto.
5.2 Book Value. As used herein, the term "Book Value" of the Corporation
means the total Shareholder's equity as reflected on the Corporation's balance
sheet as of the last day of the Corporation's fiscal year immediately preceding
the Event, determined by the certified public accounting firm regularly engaged
by the Corporation ("Public Accountants") in accordance with generally accepted
accounting principles applied on a basis consistent with that of prior years and
using the FIFO method of accounting for inventories. The Book Value when
certified in writing by the Public Accountants shall be binding and conclusive
on all parties concerned.
5.3 EBITDA. As used herein, the term "EBITDA" shall mean an amount equal
to the average net income of the Corporation for the Fiscal Period (as defined
below) (i) using the FIFO method of accounting for inventories; and (ii) before
deducting interest, income taxes, depreciation and amortization. The term
"Fiscal Period" shall mean (y) if the Event which triggers the purchase and sale
hereunder occurs during the first eight (8) months of any given fiscal year of
the Corporation, the three (3) consecutive fiscal years of the Corporation
immediately preceding the fiscal year in which the Event Date occurs, and (z) if
the Event occurs during the last four (4) months of any given fiscal year of the
Corporation, the three (3) consecutive fiscal years of the Corporation ending
with the fiscal year in which the Event occurs.
5.4 Changes in EBITDA Multiplier. On or about each anniversary of the
date hereof, or at such other time as is agreeable to them, the Corporation
shall review the multiplier stated in Section 5.1(iii) hereof to determine
whether or not such multiplier should be amended as determined by vote of the
Board of Directors of the Corporation, it being the intention of the parties
that the formula accurately reflects the fair value of the Corporation based
upon all relevant facts and circumstances at the time such matter is being
considered. The parties agree that such multiplier shall be changed from time
to time in a manner consistent with any changes to a similar multiplier, if any,
set forth in any buy-sell agreement(s) between the Voting Shareholders and the
Corporation governing the purchase and sale of Voting Shares among them.
5.5 Purchase Price of Shares Upon Happening of Certain Events.
Notwithstanding the terms of Section 5.1 hereof, the Purchase Price to be paid
for the Shares to be purchased upon (i) the exercise of rights of first offer
under Section 3.2 hereof; (ii) the voluntary resignation of a Terminating
Shareholder, other than a Senior Terminating Shareholder who elects to defer the
Event pursuant to paragraph 4.1(d) hereof, occurring prior to January 1, 2002;
or (iii) the termination of a Terminating Shareholder for Cause, shall be an
amount equal to Six and 34/00
10
<PAGE>
Dollars ($6.34) per Share. The parties expressly acknowledge that the Purchase
Price for Shares purchased following the voluntary resignation of a Terminating
Shareholder occurring from and after January 1, 2002, shall be determined in
accordance with Section 5.1 hereof.
ARTICLE
6
PAYMENT OF THE PURCHASE PRICE AND OTHER MATTERS
-----------------------------------------------
6.1 Payment. The Purchase Price for the Shares purchased hereunder shall
be paid in full in cash at the closing, except that at the option of each
purchasing party, up to sixty percent (60%) of the Purchase Price may be
deferred as provided herein, provided that at least forty (40%) of the Purchase
Price is paid in cash at closing.
6.2 Promissory Note. The deferred portion of the Purchase Price shall be
evidenced by a promissory note ("Note") of the purchasing party made payable to
the order of the selling party. The Note shall be in the form of Exhibit "B"
attached hereto and shall be dated as of the closing. Except as otherwise set
forth below, the principal balance shall be paid over a time not exceeding sixty
(60) months and each installment of the principal balance shall include
interest, accruing from the date of the Note, at a rate announced from time to
time by the LaSalle National Bank as its prime rate (the "Interest Rate").
ARTICLE
7
THE CLOSING
-----------
7.1 Location. Unless otherwise agreed by the parties, the closing of the
sale and purchase of the Shares under Article 3 or 4 hereof shall take place at
such location as the parties to such sale shall agree upon.
7.2 Time.
(a) Article 3 Transfer. In the case of a purchase under Article 3,
the closing shall take place in accordance with the terms of the Notice,
provided that such closing shall not occur earlier than thirty (30) days after
the expiration of (i) Sloan's Option Period if Sloan elects to purchase the
Shares, (ii) the Voting Shareholders' Options Period if the Shares are to be
purchased by the other Voting Shareholders in addition to or in place of Sloan,
or (iii) the Corporation's Option Period if the Shares, or any of them, are to
be purchased by the Corporation.
11
<PAGE>
(b) Article 4 Transfer. In the case of a purchase of Shares under
Article 4, the closing shall take place within ninety (90) days after the
determination of the Purchase Price of the Departing Shareholder's Shares.
7.3 Execution and Delivery of Documents. Upon the closing of the sale and
purchase, the selling Non-Voting Shareholder and the purchasing party shall
execute and deliver to each other the various documents which shall be required
to carry out their undertakings hereunder including without limitation, the
payment of cash and the execution and delivery of the Note and any collateral
instruments.
7.4 Resignation as Officer. Upon the closing of the sale and purchase,
the selling Non-Voting Shareholder shall resign as an officer of the
Corporation, if he holds any such position.
ARTICLE
8
TERMINATION OF AGREEMENT
------------------------
8.1 Events Causing Termination. This Agreement and all restrictions on
transfer created hereby shall terminate on the occurrence of any of the
following events:
(a) Upon the adoption of a plan of dissolution of the Corporation,
provided said plan is carried out diligently and all assets remaining after
payment of or provision for liabilities are distributed to the Shareholders
within a reasonable time thereafter; or
(b) The execution of a written instrument to that effect signed by the
Controlling Shareholders and the Corporation; or
(c) Permanent cessation of the business of the Corporation; or
(d) The sale of substantially all of the assets or business of the
Corporation; or
(e) The Voting Shareholders becoming the legal and beneficial owner of
all then issued and outstanding Shares; or
(f) The consummation of a firm underwritten public offering (a "Public
Offering") of securities of the Corporation.
8.2 Effect of Termination. The termination of this Agreement for any
reason shall not effect any accrued right or remedy existing hereunder prior to
the effective date of such termination.
12
<PAGE>
ARTICLE
9
MISCELLANEOUS
-------------
9.1 Piggyback Registration Rights. The Corporation agrees that at any
time during the term of this Agreement, if the Corporation shall seek a Public
Offering, each Non-Voting Shareholder shall be notified and shall be entitled to
elect to have included in such proposed registration, without cost or expense,
such number of Shares as the underwriter for the offering shall permit;
provided, however, that in the event the underwriter shall permit less than all
of the Shares to be registered the number of Shares included in such
registration shall be reduced on a pro rata basis among the Non-Voting
Shareholders (the "Piggy-Back Rights"). In the event of such a proposed
registration, the Corporation shall furnish the Non-Voting Shareholders with no
less than thirty (30) days written notice prior to the proposed filing of the
registration statement. Such notice shall continue to be given by the
Corporation to such Non-Voting Shareholders for each proposed registration by
the Corporation until such time as all of the Shares have been registered. Such
Non-Voting Shareholders shall exercise their Piggy-Back Rights by giving written
notice within twenty (20) days of the receipt of the Corporation's notice of
intention to file a registration statement.
9.2 Restrictive Covenants.
(a) Each of the Non-Voting Shareholders agree that during the Non-
Voting Shareholder's employment and for a period of eighteen (18) months after
the termination of his employment for any reason whatsoever or for no reason,
whether voluntary or involuntary, the Non-Voting Shareholder will not, except on
behalf of the Corporation:
(i) directly or indirectly, contact, solicit or direct any person,
firm or corporation to contact or solicit, any of the Corporation's
customers or prospective customers (as hereinafter defined) for the purpose
of selling or attempting to sell, any products and/or services that are the
same as or similar to the products and services provided by the Corporation
to its customers. In addition, each Non-Voting Shareholder will not
disclose the identity of any such customers or prospective customers to any
person, firm, corporation, association, or other entity for any reason or
purpose whatsoever; and
(ii) directly or indirectly, whether as an investor (excluding
investments representing less than one percent (1%) of the common stock of
a public company), lender, owner, stockholder, officer, director,
consultant, employee, agent, salesperson or in any other capacity, whether
part-time or full-time, become associated with any business involved in the
design, manufacture, marketing, sale, or servicing of products then
constituting one percent (1%) or more of the annual sales of the
Corporation; and
(iii) solicit or accept if offered to him, with or without
solicitation, on his own behalf or on behalf of any other person, the
services of any person who is an employee of
13
<PAGE>
the Corporation, nor solicit any of the Corporation's employees to
terminate employment with the Corporation; and
(iv) act as a consultant, advisor, officer, manager, agent, director,
partner, independent contractor, owner, or employee for or on behalf of any
of the Corporation's customers or prospective customers (as hereinafter
defined), with respect to or in any way with regard to any aspect of the
Corporation's business and/or any other business activities in which the
Corporation engages during the term of the Non-Voting Shareholder's
employment with the Corporation.
(b) As used herein, "customer" shall be defined as any person, firm,
or entity that purchased any type of product and/or service from the Corporation
or is or was doing business with the Corporation within the twelve (12) month
period immediately preceding termination of the Non-Voting Shareholder's
employment; and "prospective customer" shall be defined as any person, firm, or
entity contacted or solicited by the Corporation or the Non-Voting Shareholder
(whether directly or indirectly) or who contacted the Corporation or the Non-
Voting Shareholder (whether directly or indirectly) within the twelve (12) month
period immediately preceding termination of the Non-Voting Shareholder's
employment for the purpose of having such persons, firms, or entities become a
customer of the Corporation.
(c) Each of the Non-Voting Shareholders acknowledges and agrees that
any violation of the terms of the Confidentiality Agreement between him and the
Corporation, including without limitation such Non-Voting Shareholder's
divulging or imparting any confidential information of the Corporation to any
competitor of the Corporation or any third party, or using such confidential
information for himself, shall afford the Corporation all of the rights and
remedies set forth in paragraph 9.2(d) hereof.
(d) It is agreed that any breach or anticipated or threatened breach
of any of the Non-Voting Shareholder's covenants contained in this paragraph 9.2
will result in irreparable harm and continuing damages to the Corporation and
its business and that the Corporation's remedy at law for any such breach or
anticipated or threatened breach will be inadequate and, accordingly, in
addition to any and all other remedies that may be available to the Corporation
at law or in equity in such event, any court of competent jurisdiction may issue
a decree of specific performance or issue a temporary and permanent injunction,
without the necessity of the Corporation posting bond or furnishing other
security and without proving special damages or irreparable injury, enjoining
and restricting the breach, or threatened breach, of any such covenant. In
addition to, and not in lieu of, the foregoing rights and remedies, the
Corporation shall be entitled to receive from the breaching Non-Voting
Shareholder an amount equal to the unpaid balance, if any, of the Purchase Price
due to the breaching Non-Voting Shareholder (as of the date such breach first
occurred) with respect to the purchase of his Share, and such amount may be set
off from any monies due such breaching Non-Voting Shareholder by the
Corporation, which amount shall constitute liquidated damages and not a penalty.
In the event the maker of the Note is someone other than the Corporation, the
breaching Non-Voting Shareholder shall be deemed to have irrevocably assigned to
the Corporation all of his right, title and interest in and to the Note,
including without limitation the balance of any and all amounts remaining unpaid
14
<PAGE>
thereunder, and no additional amounts shall be owed to such breaching Non-Voting
Shareholder under the Note.
(e) Anything contained in this paragraph 9.2 to the contrary
notwithstanding, a Terminating Shareholder (i) whose employment is terminated by
the Corporation at any time other than for Cause; or (ii) whose employment
terminates (including without limitation, upon his resignation) on or after
January 1, 2002 other than for Cause, shall have the right and option to be free
of the restrictive covenants imposed by paragraph 9.2(a) of this Agreement
following his employment, provided such Terminating Shareholder elects to
receive, in lieu of the Purchase Price determined in accordance with paragraph
5.1 hereof, an amount for his Shares equal to the amount the Terminating
Shareholder paid to acquire such Shares. The Terminating Shareholder shall
irrevocably make such election by giving written notice thereof to the Voting
Shareholders and the Corporation within thirty (30) days following the last date
of such Terminating Shareholder's employment, which notice must expressly state
that the Terminating Shareholder has irrevocably elected to receive an amount
for his Shares equal to the amount such Terminating Shareholder paid to acquire
same in lieu of the Purchase Price determined in accordance with paragraph 5.1
of this Agreement. In such event, such Terminating Shareholder shall be deemed
to be released from the restrictive covenants set forth in paragraph 9.2 hereof,
provided that such Terminating Shareholder proceeds to sell his Shares in strict
accordance with the other terms of this Agreement. The Non-Voting Shareholders
acknowledge that the foregoing right and option shall not be available to any
Non-Voting Shareholder whose employment terminates (i) due to his resignation
prior to January 1, 2002, or (ii) at any time for Cause.
9.3 Effect of Improper Transfer. If a transfer or attempted transfer
violates any provision of this Agreement or if the transferor, after the
transfer, reacquires all or any portion of the transferred Shares, such
transfers or attempted transfers shall be null and void and the Shares
transferred or attempted to be transferred shall remain subject to this
Agreement as if no transfer had been made.
9.4 Entire Agreement. The terms, conditions and covenants contained
herein are the full and complete terms of the agreement between the parties
hereto regarding the subject matter hereof and supersede any and all prior
agreements by and among the Corporation and the Shareholders concerning the
ownership, sale or other disposition of the Shares. No alterations, amendments
or modifications of such terms shall be binding on the parties hereto unless
reduced to writing and approved by the Board of Directors of the Corporation.
9.5 Binding Effect. This Agreement shall be binding not only upon the
parties hereto, but upon their respective heirs, legal representatives,
successors and assigns. All persons bound hereby shall execute such instruments
and perform such acts as may be reasonably necessary or desirable to effectuate
the terms and provisions of this Agreement.
9.6 Adoption by Corporation. The Voting Shareholders will cause the Board
of Directors to adopt appropriate minutes and resolutions recognizing,
confirming, ratifying and adopting the terms of this Agreement and any
amendments to the By-Laws consistent with the provisions herein.
15
<PAGE>
9.7 Reference in Will. Each Non-Voting Shareholder shall make reference
to this Agreement in any Will or Codicil that he may hereafter execute and shall
direct the executor therein to comply with all of its terms and provisions.
9.8 Notices. Any and all notices given in connection with this Agreement
shall be deemed adequately given only if in writing and personally delivered,
sent by first class registered or certified mail, postage prepaid, return
receipt requested; sent by telefacsimile, provided a hard copy is mailed on that
date to the party for whom such notices are intended or sent by other means at
least as fast and reliable as first class mail. A written notice shall be
deemed to have been given to the recipient party on the earlier of (i) the date
it shall be delivered to the address required by this Agreement; (ii) the date
delivery shall have been refused at the address required by this Agreement;
(iii) with respect to notices sent by mail, the date as of which the postal
service shall have indicated such notice to be undelivered at the address
required by this Agreement, or (iv) with respect to a telefacsimile, the date on
which the telefacsimile is sent. Any and all notices referred to in this
Agreement, or which any party desires to give to the other, shall be addressed
as follows:
Name Address
- ---- -------
To the Corporation The GSI Group, Inc.
P.O. Box 20
Assumption, Illinois 62510
Attn: John C. Sloan, CEO
with a copy to John Funk,
Executive Vice President and General Counsel
To Sloan John C. Sloan
74 Allen Bend Drive
Decatur, Illinois 62521
To Andrade Jorge Andrade
3209 Falcon Point
Springfield, Illinois 62707
To Funk John Funk
777 South Monroe Street
Decatur, Illinois 62522
To Buffett Howard Buffett
407 Southmoreland Place
Decatur, Illinois 62521
16
<PAGE>
To the Non-Voting Shareholders: at their respective addresses as set forth
on Exhibit A attached hereto
with a copy of all notices Sachnoff & Weaver, Ltd.
at the same time to: 30 South Wacker Drive
Suite 2900
Chicago, Illinois 60606
Attn: Stewart Dolin, Esq.
or to such other address as the person to whom notice is to be given may have
furnished to the other in writing in accordance herewith. A communication given
by any other means shall be deemed duly given when actually received by the
addressee.
9.9 Specific Performance. The Shares cannot be readily purchased or sold
in the open market, and for that reason, among others, the parties will be
irreparably damaged in the event that this Agreement is not specifically
enforced. Should any dispute arise concerning whether a proposed sale or
disposition of the Shares would violate this Agreement, the parties agree that
an injunction may be issued restraining any sale or disposition pending the
determination of such controversy. In the event of any controversy concerning
the right or obligation to purchase or sell any of the Shares, such right or
obligation shall be enforceable in a court of equity by a decree of specific
performance. Such remedy shall, however, be cumulative and not exclusive, and
shall be in addition to any other remedy which the parties may have at law, in
equity or otherwise.
9.10 Construction of Terms. Unless otherwise specifically provided, a
reference to a particular "section", "Section", or "Article" shall mean the
section, Section, or Article in this Agreement.
9.11 Governing Law. This Agreement shall be interpreted, governed and
construed in all respects by the internal laws of the State of Illinois, and any
action commenced to enforce any of the provisions hereof shall have as its venue
Christian County, Illinois.
9.12 Payment of Legal Costs and Expenses. In the event any action is
commenced to challenge or enforce the terms and provisions hereof, the party who
is successful in such action based upon a final, unappealable court order, shall
be reimbursed by the unsuccessful party for his fee, costs and expenses
(including without limitation reasonable attorneys' and accountants' fees, costs
and expenses) incurred in connection with the legal proceeding.
9.13 Gender. Unless the context otherwise requires, any pronouns, wherever
used herein, shall include the corresponding masculine, feminine or neuter
pronouns and the plural shall include the singular, and vice versa.
9.14 Headings. Article and paragraph headings are included herein solely
for convenience and shall not be construed to modify or explain any of the
substantive provisions hereof.
17
<PAGE>
9.15 Binding Effect. This Agreement is binding upon and inures to the
benefit of the Corporation, its successors, transferees and assigns and to the
Shareholders and their respective heirs, personal representatives, successors,
permitted transferees and permitted assigns. Wherever used in this Agreement,
Non-Voting Shareholder shall refer to the Non-Voting Shareholders originally
named above and any persons who subsequently acquire the Shares for so long as
they shall have any interest in the Shares, and thereafter to his or their
respective heirs, personal representatives, successors, transferees and assigns.
9.16 Counterparts. This Agreement may be executed and delivered in two or
more substantially identical counterparts, each of which shall be an original
document as to the person or persons signing it and all of which together shall
constitute a single binding agreement.
9.17 Invalid Provision. If any provision of this Agreement is finally
determined by any court of competent jurisdiction to be effective only if said
provision is modified to limit its duration, area, scope, or applicability and
if such determination is upheld on appeal or no appeal from such determination
is taken, then the parties hereto agree that they shall amend and modify such
provisions to restrict the duration, area, scope, or applicability thereof to
the minimum extent required to make such provision enforceable, and they further
hereby consent to the entry by a court of an order to so restrict such
provision. If any provision of this Agreement shall be held invalid, the
remainder of this Agreement shall continue in full force and effect.
9.18 No Right to Continued Employment. Nothing contained herein or by
virtue of the ownership of Shares by any or all of the Non-Voting Shareholders
shall create, or be deemed to create, any right of employment in any Non-Voting
Shareholder, limit or restrict the Corporation's or any given Non-Voting
Shareholder's right to terminate such Non-Voting Shareholder's employment or
evidence any agreement or understanding that any given Non-Voting Shareholder
will remain employed by the Corporation for any particular length of time.
18
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed and attested by its duly authorized officers, and the Shareholders have
signed their names, all on the day and year first above written.
The GSI Group, Inc.
By: /s/ John C. Sloan
----------------------------------
Title: CEO
-------------------------------
/s/ John C. Sloan
-------------------------------------
John C. Sloan
/s/ Jorge Andrade
-------------------------------------
Jorge Andrade
/s/ John Funk
-------------------------------------
John Funk
/s/ Howard Buffett
-------------------------------------
Howard Buffett
Non-Voting Shareholders:
_____________________________________
_____________________________________
19
<PAGE>
/s/ Al Deutsch
- -------------------------
Al Deutsch
/s/ Charles Jordan /s/ Chris van Rossem
- ------------------------- --------------------------
Charles Jordan Chris van Rossem
/s/ David Vettel /s/ Gene Wiseman
- ------------------------- --------------------------
David Vettel Gene Wiseman
/s/ John Betscher /s/ Donald Galvin
- ------------------------- --------------------------
John Betscher Donald Galvin
/s/ Russ Mello /s/ Kevin Sloan
- ------------------------- --------------------------
Russ Mello Kevin Sloan
/s/ Dale Colee /s/ Steve Basham
- ------------------------- --------------------------
Dale Colee Steve Basham
/s/ Doug Meyer /s/ Gene Pollock
- ------------------------- --------------------------
Doug Meyer Gene Pollock
20
<PAGE>
Exhibit 12.1
THE GSI GROUP, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGE
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Twelve Months
Ended Ended
Year Ended December 31, September 30, September 30,
--------------------------------------------------------------- ------------- -------------
Pro Forma Pro Forma Pro Forma
1992(1) 1993(1) 1994(1) 1995(1) 1996 1996(2) 1996 1997 1997(2) 1997(2)
------- ------- ------- ------- ----- --------- ------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income (Loss) from $7,819 $2,911 $3,845 $(1,758) $10,981 $ 5,327 $9,288 $13,124 $ 9,876 $11,732
continuing operations ====== ====== ====== ======= ======= ======= ====== ======= ======= =======
Add Fixed Charges:
Interest expense on 721 1,175 1,934 2,894 3,590 10,959 2,524 3,712 8,127 10,854
borrowings and
amortization of deferred
financing costs
Interest portion of rent 161 237 384 531 432 432 316 403 403 537
expense ------ ------ ------ ------- ------- ------- ------ ------- ------- -------
882 1,412 2,318 3,425 4,022 11,391 2,840 4,115 8,530 11,391
====== ====== ====== ======= ======= ======= ====== ======= ======= =======
Adjusted Earnings 8,701 4,323 6,163 1,667 15,003 16,718 12,128 17,239 18,406 23,123
====== ====== ====== ======= ======= ======= ====== ======= ======= =======
Ratio of Earnings to 9.87x 3.06x 2.66x (3) 3.73x 1.47x 4.27x 4.19x 2.16x 2.03x
Fixed Charges ====== ====== ====== ======= ======= ====== ======= ======= =======
- --------------------------
</TABLE>
(1) In December 1995, the Company signed an agreement to sell the working
capital and fixed assets of its Heritage Vinyl Division. In January 1996,
the sale was closed. The Company's 1994 and prior year financial statements
were restated to reflect this discontinued operation.
(2) Pro Form to give effect to (a) the Offering by the Company of $100,000,000
principal amount 10 1/4% Senior Subordinated Notes due 2007 and the
application of the net proceeds therefrom and (b) the acquisition by the
Company of all of the capital stock of David Manufacturing Co., in Iowa
corporation, on November 5, 1997.
(3) The ratio of earnings to fixed charges is expressed as the ratio of fixed
charges plus pretax earnings to fixed charges. Fixed charges include
interest on borrowings, amortization of deferred financing costs and the
interest portion of rent expense. Earnings were insufficient to cover fixed
charges for the year ended December 31, 1995 by $1.8 million.
<PAGE>
Exhibit 16.1
[LETTERHEAD OF GEO. S. OLIVE & CO. LLC]
December 16, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
We have read the statements made by The GSI Group, Inc. (see attached), which we
understand will be filed with the Commission, pursuant to Item 21 of Form S-4,
and are in agreement with the statements contained therein concerning our firm.
Sincerely,
/s/ Geo. S. Olive & Co. LLC
GEO. S. OLIVE & CO. LLC
A member of
Moores
Rowland
INTERNATIONAL
An association of independent
accounting firms throughout the world.
545 FIRST NATIONAL BANK BUILDING, SPRINGFIELD, ILLINOIS 62794-9429
(217) 753-1375 FAX: (217) 744-0193
OFFICES LOCATD IN INDIANA, ILLINOIS AND OHIO
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of the Company as of December 31,
1995 and 1996 and for the years ended December 31, 1994, 1995, and 1996,
included in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as stated in their report appearing herein.
The financial statements of DMC as of and for the year ended October 31,
1996, included in this Prospectus, have been audited by McGladrey & Pullen, LLP,
independent accountants, as stated in their report appearing herein.
In 1996, for business reasons, the Company's Board of Directors approved
the dismissal of Arthur Andersen LLP, which had been the Company's principal
accounting firm for fiscal 1992 through fiscal 1995, and the appointment of Geo.
S. Olive & Co. LLC. Following the completion of the 1996 audit, the Board
approved the reappointment of Arthur Andersen LLP as the Company's principal
accounting firm. None of the reports on the Company's financial statements
prepared by either Arthur Andersen LLP or Geo. S. Olive & Co. LLC contained an
adverse opinion or a disclaimer of opinion, or were qualified or modified as to
uncertainty, audit scope or accounting principles. There were no disagreements
with either Arthur Andersen LLP or Geo. S. Olive & Co. LLC on any matter of
accounting principles or practices, financial statement disclosures or auditing
scope or procedure through the date of its dismissal.
<PAGE>
Exhibit 21.1
The GSI Group, Inc.
List of Subsidiaries
<TABLE>
<CAPTION>
Company Name Location Type of Entity
- ------------ -------- --------------
<S> <C> <C>
GSI/Cumberland Malaysia SDN, BHD
GSI/Cumberland South Africa SA Prop Limited
GSI/Cumberland Netherlands BV
GSI/Cumberland Mexico Limitada
The GSI Group (Canada) Inc. Canada Corporation
DMC U.S.A.-Iowa S-Corporation
Cumberland-USIMECA Brazil Limited Liab. Co.
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
December 19, 1997
<PAGE>
Exhibit 23.2
McGLADREY & PULLEN, LLP
--------------------------------------------
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
David Manufacturing Co.
Mason City, Iowa
To the Board of Directors
The GSI Group, Inc.
Assumption, Illinois
We hereby consent to the use in this Registration Statement of our report, dated
December 6, 1996, relating to the financial statements of David Manufacturing
Co. and to the reference to our Firm under the caption "Experts" in the
Prospectus.
/s/ McGLADREY & PULLEN, LLP
---------------------------
McGLADREY & PULLEN, LLP
Mason City, Iowa
December 22, 1997
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------
LASALLE NATIONAL BANK
(Exact name of trustee as specified in its charter)
36-0884183
(I.R.S. Employer Identification No.)
135 South LaSalle Street, Chicago, Illinois 60603
(Address of principal executive offices) (Zip Code)
-----------------------
M. ROBERT K. QUINN
Senior Vice President and General Counsel
Telephone: (312) 904-2010
135 South LaSalle Street
Chicago, Illinois 60603
(Name, address and telephone number of agent for service)
-----------------------
The GSI Group, Inc.
(Exact name of obligor as specified in its charter)
Delaware 37-0856587
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
1004 E. Illinois Street
Assumption, Illinois 62510
(Address of Principal Executive Offices) (Zip Code)
----------------------
David Manufacturing Co.
(Exact name of guarantor as specified in its charter)
Iowa 42-0920500
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
1600 12th Street, N.E. 50401
Madison City, IA (Zip Code)
(Address of Principal Executive Offices)
<PAGE>
$100,000,000 Senior Subordinated
Notes
10.25% due November 1, 2007
(Title of the indenture securities)
<PAGE>
ITEM 1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
1. Comptroller of the Currency, Washington D.C.
2. Federal Deposit Insurance Corporation, Washington, D.C.
3. The Board of Governors of the Federal Reserve Systems,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
If the obligor or any underwriter for the obligor is an affiliate of the
trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an
affiliate of the trustee.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting securities of the
trustee:
Not applicable
<PAGE>
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each other indenture.
Not applicable
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of Section
310(b)(1) of the Act arises as a result of the trusteeship under
such otherindenture, including a statement as to how the indenture
securities will rank as compared with the securities issued under
such other indenture.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR
OR UNDERWRITERS.
If the trustee or any of the directors or executive officers of the trustee is a
director, officer, partner, employee, appointee, or representative of the
obligor or of any underwriter for the obligor, identify each such person having
any such connection and state the nature of each such connection.
Not applicable
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
Furnish the following information as to the voting securities of the trustee
owned beneficially by the obligor and each director, partner and executive
officer of the obligor.
Not applicable
<PAGE>
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the trustee
owned beneficially by each underwriter for the obligor and each director,
partner, and executive officer of each such underwriter.
Not applicable
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by the
trustee:
Not applicable
ITEM 9. SECURITIES OF THE UNDERWRITER OWNED OR HELD BY THE TRUSTEE.
If the trustee owns beneficially or holds as collateral security for obligations
in default any securities of an underwriter for the obligor, furnish the
following information as to each class of securities of such underwriter any of
which are so owned or held by the trustee.
Not applicable
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for obligations
in default voting securities of a person who, to the knowledge of the trustee
(1) owns 10 percent or more of the voting securities of the obligor or (2) is an
affiliate, other than a subsidiary, of the obligor, furnish the following
information as to the voting securities of such person.
Not applicable
<PAGE>
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for obligations
in default any securities of a person who, to the knowledge of the trustee, owns
50 percent or more of the voting securities of the obligor, furnish the
following information as to each class of securities of such person any of which
are so owned or held by the trustee.
Not applicable
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
If the obligor is indebted to the trustee, furnish the following information.
Not applicable
ITEM 13. DEFAULTS BY THE OBLIGOR.
a) State whether there is or has been a default with respect to the securities
under this indenture. Explain the nature of any such default.
Not applicable
b) If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
Not applicable
<PAGE>
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable
ITEM 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is authorized
to act as sole trustee under indentures qualified or to be qualified.
Not applicable
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility and
qualification.
1. A copy of the Articles of Association of LaSalle National Bank
now in effect.
2. A copy of the certificate of authority to commence business.
3. A copy of the authorization to exercise corporate trust powers.
4. A copy of the existing By-Laws of LaSalle National Bank.
5. Not applicable.
6. The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
8. Not applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,the trustee,
LaSalle National Bank, a corporation organized and existing under the laws of
the United States of America, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Chicago, State of Illinois, on the 3rd day of
November 1997.
LASALLE NATIONAL BANK
By: /s/ Diane Swanson
-----------------
Diane Swanson
Assistant Vice President
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
<PAGE>
ARTICLES
OF
ASSOCIATION
LA SALLE NATIONAL BANK (LOGO)
LA SALLE NATIONAL BANK
CHICAGO, ILLINOIS
<PAGE>
(LOGO)
LaSalle National Bank
ARTICLES OF ASSOCIATION
FIRST. The title of this association, which shall carry on the
business of banking under the laws of the United States shall be "LaSalle
National Bank."
SECOND. The place where the main banking house or office of this
association shall be located, its operations of discount and deposit carried on,
and its general business conducted, shall be Chicago, County of Cook, State of
Illinois.
THIRD. The Board of Directors of this association shall consist of
such number of its shareholders, not less than five nor more than twenty-five,
as from time to time shall be determined by a majority of the votes to which all
of its shareholders are at the time entitled. A majority of the Board of
Directors shall be necessary to constitute a quorum for the transaction of
business. The Board of Directors, by vote of a majority of the full board, may,
between annual meetings of shareholders increase the membership of the Board
where the number of directors last elected by shareholders was 15 or less, by
not more than two members, and where the number of directors last elected by
shareholders was 16 or more, by not more than four members and by a like vote
appoint qualified persons to fill the vacancies created thereby; provided that
the number of Directors shall at no time exceed twenty-five.
FOURTH. The regular annual meeting of the shareholders of this
association shall be held at its main banking house, or other convenient place
duly authorized by the board of directors on such day of each year as is
specified therefor in the bylaws.
FIFTH. The amount of capital stock which this association is
authorized to issue shall be Twenty Million Dollars ($20,000,000.00) divided
into 2,000,000 shares of common capital stock of the par value of $10.00 each;
but said capital stock may be increased or decreased from time to time, in
accordance with the provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares
thereof, other than to key officers and employees of the association upon the
exercise of options granted pursuant to the terms of a stock option plan then in
effect, as to which sales all pre-emptive rights are waived, each shareholder
shall be entitled to subscribe for such additional shares in proportion to the
number of shares of said capital stock owned by him at the time the increase is
authorized by the shareholders, unless another time subsequent to the date of
the shareholders' meeting is specified in a resolution adopted by the
shareholders at thetime the increase is authorized. The board of directors shall
have the power to prescribe a reasonable period of time within which the pre-
emptive rights to subscribe to the new shares of capital stock may be exercised.
The association, at any time and from time to time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The board of directors shall appoint one of its members
president of this association, who shall be chairman of the board, but the board
of directors may appoint a director in lieu of the president to be chairman of
the board, who shall perform such duties as may be designated by the board of
directors. The board of directors shall have the power to appoint one or more
vice presidents, a cashier and such other officers as may be required to
transact the business of this association; to fix the salaries to be paid to all
officers of this association; and to dismiss such officers, or any of them.
The board of directors shall have the power to define the duties of
officers and employees of this association, to require bonds from them, and to
fix the penalty thereof; to regulate the manner in which directors shall be
elected
<PAGE>
or appointed, and to appoint judges of the election; to make all bylaws that it
may be lawful for them to make for the general regulation of the business of
this association and the management of its affairs; and generally to do and
perform all acts that it may be lawful for a board of directors to do and
perform.
SEVENTH. This association shall have succession from the date of its
organization certificate until such time as it be dissolved by act of its
shareholders in accordance with the provisions of the banking laws of the United
States, or until its franchise becomes forfeited by reason of violation of law,
or until terminated by either a general or a special act of Congress, or until
its affairs be placed in the hands of a receiver and finally wound up by him.
EIGHTH. The board of directors of this association, or any three or
more shareholders owning, in the aggregate, not less than ten per centum of the
stock of this association, may call a special meeting of shareholders at any
time: Provided, however, that, unless otherwise provided by law, not less than
ten days prior to the date fixed for any such meeting, a notice of the time,
place, and purpose of the meeting shall be given by first-class mail, postage
prepaid, to all shareholders of record of this association at their respective
addresses as shown upon the books of the association. These articles of
association may be amended at any regular or special meeting of the shareholders
by the affirmative vote of the shareholders owning at least a majority of the
stock of this association, subject to the provisions of the banking laws of the
United States. The notice of any shareholders' meeting, at which an amendment to
the articles of association of this association is to be considered, shall be
given as herein-above set forth.
NINTH. Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the association for reasonable expenses actually
incurred in connection with any action, suit, or proceeding, civil or criminal,
to which he or they shall be made a party by reason of his being or having been
a director, officer, or employee of the association or of any firm, corporation,
or organization which he served in any such capacity at the request of the
association: Provided, however, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding as to
which he shall finally be adjudged to have been guilty of or liable for
negligence or wilful misconduct in the performance of his duties to the
association: And, provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding which
has been made the subject of a compromise settlement except with the approval of
a court of competent jurisdiction, or the holders of record of a majority of the
outstanding shares of the association, or the board of directors, acting by vote
of directors not parties to the same or substantially the same action, suit, or
proceeding, constituting a majority of the whole number of the directors. The
foregoing right of indemnification or reimbursement shall not be exclusive of
other rights to which such person, his heirs, executors, or administrators, may
be entitled as a matter of law .
********
May 17, 1982
Form No. 181, Rev 5/17/82 GW
<PAGE>
EXHIBIT 2
CERTIFICATE OF AUTHORITY
TO COMMENCE BUSINESS
<PAGE>
STATE OF ILLINOIS
AUDITOR'S OFFICE
NO.333 (LOGO)
NATIONAL BANK TRUST CERTIFICATE
Springfield, FEBRUARY 15th 1928
I, OSCAR NELSON, Auditor of Public Accounts of the State of Illinois, do
hereby certify that the NATIONAL BUILDERS BANK OF CHICAGO located at CHICAGO,
County of COOK and State of Illinois, a corporation organized under and by
authority of the statutes of the United States governing National Banks and
authority granted by the Federal Reserve Act for the purpose of accepting and
executing trusts, has this day deposited in this office, securities in the sum
of TWO HUNDRED THOUSAND Dollars, $200,000.00 of the character designated by
Section 6 of the Act of the Legislature of the State of Illinois entitled "An
Act to provide for and regulate the administration of trusts by trust
companies,"
The said deposit is made for the benefit of the creditors of said
NATIONAL BUILDERS BANK OF CHICAGO under and by virtue of the provisions of the
Act above referred to and the said securities are now held by me in this office
in my official capacity as such Auditor of Public Accounts, for the uses and
purposes aforesaid.
I further certify that by virtue of the Acts aforesaid, the NATIONAL
BUILDERS BANK OF CHICAGO is hereby authorized to accept and execute trusts and
receive deposits of trust funds under the provisions and limitations of "An Act
to provide for and regulate the administration of trusts in Illinois.
IN TESTIMONY WHEREOF, I hereunto subscribe my name and affix
(SEAL) the seal of my office, the day and year first above written.
/s/ Oscar Nelson
----------------
AUDITOR OF PUBLIC ACCOUNTS.
STATE OF ILLINOIS.
<PAGE>
NO. 13146.
TREASURY DEPARTMENT (LOGO)
OFFICE OF COMPTROLLER OF THE CURRENCY
Washington, D.C., NOVEMBER 29, 1927.
WHEREAS, by satisfactory evidence presented to the undersigned, it has been
made to appear that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of CHICAGO
in the County of COOK and State of ILLINOIS has complied with all the provisions
of the Statutes of the United States, required to be complied with before an
association shall be authorized to commence the business of Banking;
NOW THEREFORE I, J.W. MCINTOSH, Comptroller of the Currency, do hereby
certify that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of CHICAGO in the
County of COOK and State of ILLINOIS is authorized to commence the business of
Banking as provided in Section Fifty one hundred and sixty nine of the Revised
Statutes of the United States.
IN TESTIMONY WHEREOF witness my hand (SEAL) and Seal of
(SEAL) office this TWENTY-NINTH day of NOVEMBER, 1927.
/s/ J.W. McIntosh
-----------------
Comptroller of the Currency
<PAGE>
CERTIFICATE OF CHANGE OF CORPORATE TITLE
(LOGO)
NO. 13146.
TREASURY DEPARTMENT
OFFICE OF THE COMPTROLLER OF THE CURRENCY
WASHINGTON, D.C., MAY 1, 1940.
WHEREAS, by satisfactory evidence presented to me, it appears that under
authority of sections 2, 3, and 4, of the Act of Congress approved May 1, 1886,
entitled "An Act to enable national banking associations to increase their
capital stock and to change their names or location," shareholders owning two-
thirds of the stock of the national banking association heretofore known as--
"NATIONAL BUILDERS BANK OF CHICAGO," located in CHICAGO, County of COOK, State
of ILLINOIS, have voted to change the name of said association to-- "LASALLE
NATIONAL BANK," and have complied with all the provisions of the said Act
relative to national banking associations changing their name.
NOW, THEREFORE, IT IS HEREBY CERTIFIED, that the name of the said
association has been changed to-- "LASALLE NATIONAL BANK," and that such change
of name is hereby approved under authority conferred by said Act.
(SEAL) IN TESTIMONY WHEREOF, witness my hand and seal of office this
FIRST day of MAY, 1940.
/s/
----------------------------------------
ACTING Comptroller of the Currency.
<PAGE>
EXHIBIT 3
AUTHORIZATION TO EXERCISE
CORPORATE TRUST POWERS
<PAGE>
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM [LETTERHEAD]
WASHINGTON
May 9, 1940
LaSalle National Bank,
Chicago, Illinois.
Gentlemen:
The Board of Governors of the Federal Reserve System has been officially
advised by the Comptroller of the Currency that on May 1, 1940, National
Builders Bank of Chicago, Chicago, Illinois, changed its title to LaSalle
National Bank, and accordingly there is enclosed herewith a certificate showing
that LaSalle National Bank has authority to exercise the fiduciary powers
enumerated therein.
Kindly acknowledge receipt of this certificate.
Very truly yours,
S. R. Carpenter
---------------
S. R. Carpenter,
Assistant Secretary.
Enclosure
<PAGE>
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
I, S. R. Carpenter, Assistant Secretary of the Board of Governors of
the Federal Reserve System (formerly known as the Federal Reserve Board), do
hereby certify that it appears from the records of the Board of Governors of the
Federal Reserve System that:
(1) Pursuant to the authority vested in the Federal Reserve Board by
an Act of Congress approved December 23, 1913, known as the Federal Reserve Act,
as amended, the Federal Reserve Board on December 8, 1927, granted to National
Builders Bank of Chicago, Chicago, Illinois, the right to act, when not in
contravention of State or local law, as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver,
committee of estates of lunatics, or in any other fiduciary capacity in which
State banks, trust companies or other corporations which come into competition
with national banks are permitted to act under the laws of the State of
Illinois;
(2) Under the provisions of an Act of Congress approved May 1, 1886,
National Builders Bank of Chicago, Chicago, Illinois, on May 1, 1940, changed
its title to LaSalle National Bank; and
(3) By virtue of the foregoing, LaSalle National Bank, Chicago,
Illinois, has authority to act, when not in contravention of State or local law,
as trustee, executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, committee of estates of lunatics, or in any other
fiduciary capacity in which State banks, trust companies or other corporations
which come into competition with national banks are permitted to act under the
laws of the State of Illinois, subject to regulations prescribed by the Board of
Governors of the Federal Reserve System.
IN WITNESS WHEREOF, I have hereunto subscribed my name and caused the
seal of the Board of Governors of the Federal Reserve System to be affixed at
the City of Washington in the District of Columbia.
/s/ S. R. Carpenter
-------------------
Assistant Secretary.
Dated May 9, 1940
<PAGE>
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington D.C. 20219
TRUST CERTIFICATE
WHEREAS, LASALLE NATIONAL TRUST, NATIONAL ASSOCIATION, located in Chicago,
State of Illinois, being a National Banking Association, organized under the
statutes of the United States, has made application for authority to act as
fiduciary;
AND WHEREAS, applicable provisions of the statutes of the United States
authorize the grant of such authority;
NOW THEREFORE, I hereby certify that the said association is authorized to
act in all fiduciary capacities permitted by such statutes.
IN TESTIMONY WHEREOF, witness my
signature and seal of Office this
1st day of May, 1990.
/s/ John R. Powers
John R. Powers
Acting Deputy Comptroller
CHARTER NO.22159
<PAGE>
COMPTROLLER OF THE CURRENCY
[LOGO]
WASHINGTON, D.C.
WHEREAS, satisfactory evidence has been presented to the Comptroller of the
Currency that LASALLE NATIONAL TRUST, NATIONAL ASSOCIATION
located in CHICAGO State of ILLINOIS has complied with all provisions of the
schedules of the United States required to be complied with before being
authorized to commence the business of banking as a National Banking
Association.
Now, therefore I hereby verify that the above named association is
authorized to commence the business of banking as a National Banking
Association.
In Testimony Whereof, witness my signature and seal
of ???? this 1st day of May 1990
/s/ John R. Powers
John R. Powers
Charter No 22159
<PAGE>
LASALLE NATIONAL CORPORATION
UNANIMOUS WRITTEN CONSENT
OF DIRECTORS
IN LIEU OF MEETING
The undersigned, being all of the Directors of LaSalle National Corporation
(the "Corporation"), pursuant to the applicable provisions of The Delaware
General Corporation Law and Section 3.11 of Article III of the By-Laws of the
Corporation, do hereby unanimously waive all requirements as to notice of
meeting and do unanimously consent to the adoption of the resolutions set forth
below in lieu of taking such action at a formal meeting:
WHEREAS, the Corporation owns in excess of 99% of the voting stock of
LaSalle National Bank ("Bank") and 100% of the voting stock of LaSalle National
Trust, National Association ("LaSalle Trust"), each excluding director
qualifying shares, and the Bank and LaSalle Trust are each qualified to
administer trusts in the State of Illinois;
WHEREAS, it is being proposed to this Board of Directors that LaSalle Trust
succeed to each of the trust accounts of the Bank as to which such succession is
not expressly prohibited by the terms of the applicable trust instrument (the
"Proposal"), pursuant to and in accordance with Section 3-3 of the Illinois
Corporate Fiduciary Act (the "Act", 17 Ill, Rev. Stat. Par. 1551-1 et seq. at
-- ---
1553-3);
WHEREAS, pursuant to the Proposal, the Corporation would enter into with
the Bank and LaSalle Trust on or after May 1, 1990 (the "Effective Time") a
Trust Succession Agreement for the purpose of effecting the succession of
LaSalle Trust to the trust business of the Bank, which agreement will provide
for the payment to the Bank by LaSalle Trust of one or more amounts which in the
aggregate represent the fair and reasonable value of the tangible and intangible
assets transferred, not of any liabilities transferred;
WHEREAS, also pursuant to the Proposal, the Bank would enter into with
LaSalle Trust on or after the Effective Time a Trust Management Agreement
whereby LaSalle Trust will administer all of the trust business of the Bank not
succeeded to by LaSalle Trust pursuant to the Trust Succession Agreement; and
WHEREAS, also pursuant to the Proposal, the Bank would enter into with
LaSalle Trust a Lease and Allocation Arrangement with respect to certain
premises and equipment and certain services and allocating certain expenses of
the Bank and to LaSalle Trust, all on an "arm's length" basis at the fair market
value thereof.
NOW THEREFORE, BE IT RESOLVED, That effective May 1, 1990 (the "Transfer
Date") and consistent with the Proposal as presented to this board with such
modifications as the proper
<PAGE>
officers determine to be necessary or appropriate with the advice of legal
counsel, LaSalle Trust shall succeed to each of the trust accounts of the Bank
as to which such succession is not expressly prohibited by the terms of the
applicable trust instrument, pursuant to and in accordance with Section 3-3 of
the Illinois Corporate Fiduciary Act (the "Act", 17 Ill. Rev. Stat. Par. 1551-1
et seq. at 1553-3); and Lasalle Trust shall thereupon have all the rights and
- -- ---
powers and assume all the duties as of the Transfer Date and thereafter granted
to or imposed upon the Bank by law or the aforesaid instruments.
FURTHER RESOLVED, That the proper officers of the Corporation be, and they
hereby are, authorized and directed to execute a Trust Succession Agreement, on
the terms provided in the Proposal as presented to this board with such
modifications as said proper officers determine to be necessary or appropriate
with the advice of legal counsel, to facilitate the Proposal and LaSalle Trust's
succession of the Bank as trustee on the transferred fiduciary accounts.
FURTHER RESOLVED, That on or about the Transfer Date all trust files and
documents and any and all trust file property in the possession of the Bank with
respect to the trust accounts being transferred to LaSalle Trust shall be
transferred to the principal and other appropriate offices of LaSalle Trust.
FURTHER RESOLVED, That the proper officers of the Corporation be hereby
authorized, empowered and directed, on behalf of the Corporation, to do or cause
to be done any and all acts and things and execute and deliver any and all such
further documents and papers as, with advice of legal counsel, they may deem
necessary or appropriate to implement the Proposal and otherwise carry into
effect the full intent and purposes of the foregoing resolutions.
IN WITNESS WHEREOF, we, being all the Directors of the Corporation, have
executed this Unanimous Written Consent of Directors in Lieu of Meeting this
16th day of April, 1990.
/s/ Harrison F. Tempest /s/ F.B. Deiters
- ---------------------------------- -------------------------------
Harrison F. Tempest F.B. Deiters
/s/ P. Jan Kaiff /s/ Aldert E. Blank
- ---------------------------------- -------------------------------
P. Jan Kaiff Aldert E. Blank
/s/ J. J. Cyevaar
-----------------------------------
J. J. Cyevaar
2
<PAGE>
EXHIBIT 4
BY-LAWS OF LASALLE NATIONAL BANK
<PAGE>
BYLAWS
of the
LA SALLE NATIONAL BANK
(a National Banking Association which association
is herein referred to as the "bank")
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the
shareholders for the election of directors and the transaction of whatever other
business may properly come before the meeting, shall be held at the main office
of the Bank, 135 South LaSalle Street, Chicago, Illinois, or such other place as
the Board of Directors may designate, at 9:00 A.M., on the third Wednesday of
March of each year. Notice of such meeting shall be mailed, postage prepaid, at
least ten days prior to the date thereof, addressed to each shareholder at his
address appearing on the books of the Bank. If for any cause, an election of
directors is not made on the said day, the Board of Directors shall order the
election to be held on some subsequent day as soon thereafter as practicable,
according to the provisions of law; and notice thereof shall be given in the
manner herein provided for the annual meeting.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically
provided by statute, special meetings of the shareholders may be called for any
purpose at anytime by the board of directors or by any three or more
shareholders owning, in the aggregate, not less than ten percent of the stock of
the bank. Every such special meeting, unless otherwise provided by law, shall be
called by mailing, postage pre-paid, not less than ten days prior to the date
fixed for such meeting, to each shareholder at his address appearing on the
books of the bank, a notice stating the purpose of the meeting.
SECTION 1.3. NOMINATIONS FOR DIRECTOR. Nominations for election to
the board of directors may be made by the board of directors or by any
shareholder of any outstanding class of capital stock of the bank entitled to
vote for the election of directors. Nominations, other than those made by or on
behalf of the existing management of the bank, shall be made in writing and
shall be delivered or mailed to the president of the bank and to the Comptroller
of the Currency, Washington, D.C., not less than 14 days nor more than 50 days
prior to any meeting of shareholders called for the election of directors,
provided, however, that if less than 21 days' notice of the meeting is given to
the shareholders, such nomination shall be mailed or delivered to the president
of the bank and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such notification shall contain the following information to the extent
known to the notifying shareholder: (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of each proposed nominee; (d) the name and
address of the notifying shareholder; and (e) the number of shares of capital
stock of the bank owned by the notifying shareholder. Nominations not made in
accordance herewith, may, in his discretion, be disregarded by the chairman of
the meeting, and upon his instructions, the vote tellers may disregard all votes
cast for each such nominee.
SECTION 1.4. JUDGES OF ELECTION. Every election of directors shall be
managed by three judges, who shall be appointed by the board of directors prior
lo the time of said election. The judges of election shall hold and conduct the
election at which they are appointed to serve; and after the election, they
shall file with the cashier a certificate under their hands, certifying the
result thereof and the names of the directors elected. The judges of election.
at the request of the chairman of the meeting, shall act as tellers of any other
vote by ballot taken at such meeting, and shall certify the result thereof.
1
<PAGE>
SECTION 1.5. PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this bank shall act as proxy. Proxies shall be valid only for one meeting, to
be specified therein, and any adjournments of such meeting. Proxies shall be
dated and shall be filed with the records of the meeting.
SECTION 1.6. QUORUM. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the articles of association.
ARTICLE II
DIRECTORS
SECTION 2.1. BOARD OF DIRECTORS. The board of directors (hereinafter
referred to as the "board"), shall have power to manage and administer the
business affairs of the bank. Except as expressly limited by law, all corporate
powers of the bank shall be vested in and may be exercised by said board.
SECTION 2.2. NUMBER. The board shall consist of not less than five or
more than twenty-five shareholders, the exact number within such minimum and
maximum limits to be fixed and determined from time to time by resolution of a
majority of the full board or by resolution of the shareholders at any meeting
thereof; provided, however, that a majority of the full board may not increase
the number of directors by more than two if the number of directors last elected
by shareholders was fifteen or less and by not more than four where the number
of directors last elected by shareholders was sixteen or more, provided that in
no event shall the number of directors exceed twenty-five.
SECTION 2.3. ORGANIZATION MEETING. The cashier, upon receiving the
certificate of the judges, of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the main office of the bank for the purpose of organizing the new board
and electing and appointing officers of the bank for the succeeding year. Such
meeting shall be appointed to be held on the day of election or as soon
thereafter as practicable, and, in any event, within thirty days thereof. If, at
the time fixed for such meeting, there shall not be a quorum present the
directors present may adjourn the meeting, from time to time, until a quorum is
obtained.
SECTlON 2.4 REGULAR MEETINGS. The regular meetings of the board
shall be held, without notice, on the third Wednesday of each month at the main
office. When any regular meeting of the board falls upon a holiday, the meeting
shall be held on the next banking business day unless the board shall designate
some other day.
SECTION 2.5 SPECIAL MEETINGS. Special meetings of the board may be
called by the chairman of the board, the president, or at the request of three
or more directors. Each member of the board shall be given notice stating the
time and place, by telegram, letter or in person, of each such special meeting.
SECTION 2.6. QUORUM. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but a less number
may adjourn any meeting from time to time, and the meeting may be held, as
adjourned, without further notice.
SECTION 2.7. VACANCIES. When any vacancy occurs among the directors,
the remaining members of the board, in accordance with the laws of the United
States, may appoint a di rector to fill such vacancy at any regular meeting of
the board, or at a special meeting called for that purpose.
2
<PAGE>
SECTION 2.8. RETIREMENT POLICY. A retirement policy adopted by the
board of directors shall be applicable to directors who are not active officers
of the bank.
ARTICLE III
COMMITTEES OF THE BOARD
SECTION 3.1. EXECUTIVE COMMITTEE. There shall be an executive
committee of the board. The members of the executive committee shall be chosen
by the board from time to time, shall hold office during its pleasure, and shall
consist of the chairman of the board, the chairman of the executive committee
selected by the board, who may but need not be the same person designated to be
president, and the president, ex officio, and not less than seven additional
members of the board who shall not be active officers of the bank. It shall be
the duty of this committee to exercise such powers and perform such duties in
respect to the making of loans and discounts as shall from time to time be
specified by resolution of the board. During such periods as the board shall not
be in session, the executive committee shall have and may exercise all the
powers of the board except such as are by law or by these bylaws required to be
exercised only by the board. The executive committee may make rules for holding
and conducting its meetings and keep in the minute book of the bank a report of
all action taken which shall be submitted for approval at each regular meeting
of the board and the action of the board shall be recorded in the minutes of
that meeting. A quorum of the executive committee shall consist of not less than
five of its members, at least three of whom shall not be active officers of the
bank. The chairman of the board, or in his absence in the order named if
present, the chairman of the executive committee or the president, may designate
any director who is not an active officer of the bank, or a designated member,
to serve as a member of the executive committee at any specified meeting.
Vacancies in the executive committee at any time existing may be filled by
appointment by the board. The board may at anytime revise or change the
membership and chairmanship of the executive committee and make new or
additional appointments thereto. The chairman of the executive committee shall
be ex officio a member of all committees except the examining committee and the
trust audit committee, and shall have such other duties as may from time to time
be assigned him by the board.
SECTION 3.2. OFFICERS' COMPENSATION COMMITTEE. There shall be an
officers' compensation committee of the board. The members of the officers'
compensation committee shall consist of the members ex officio provided for in
other sections of these bylaws and not less than three additional non-officer
members of the board who shall be appointed by the board each year at its first
meeting after the directors have been elected and qualified. It shall be the
duty of this committee to study the compensation of all officers of the bank and
from time to time report their recommendations to the board; and such other
duties, if any, as may from time to time be assigned to it by the board. A
majority of the committee, including at least two non-officer members, shall be
necessary for the committee to keep records of its action.
SECTION 3.3. EXAMINING COMMITTEE. There shall be an examining
committee of the board. The members of the examining committee shall consist of
the members ex officio provided for in other sections of these bylaws, but
exclusive of any active officer of the bank and not less than three additional
non-officer members of the board who shall be appointed by the board each year
at its first meeting after the directors have been elected and qualified. It
shall be the duty of this committee to make an examination at least twice each
year into the affairs of the bank or to cause the examinations to be made by
accountants (who may be the bank's own accountants) responsible only to the
board in such examinations, and to report the result of such examinations in
writing to the board at the next regular meeting thereafter, or it may, at its
sole discretion, submit the reports of the national bank examiner or of the
Chicago Clearing House Association examination, with or without additional
comments by the committee itself, for, and in lieu of its personal examinations.
Such reports shall state whether the bank is in sound condition, whether
adequate internal audit controls and procedures are being maintained and shall
recommend to the board such changes in the manner of doing business or
conducting the affairs of the bank as shall be deemed advisable.
3
<PAGE>
SECTION 3.4. OTHER COMMITTEES. The board may appoint, from time to
time, from its own members, other committees of one or more persons, for such
purposes and with such powers as the board may determine.
ARTICLE IV
OFFICERS AND EMPLOYEES
SECTION 4.1. CHAIRMAN OF THE BOARD. The board shall appoint one of
its members to be chairman of the board. The chairman of the board shall
supervise the carrying out of the policies adopted or approved by the board. He
shall have general executive powers, as well as the specific powers conferred by
these bylaws. He shall be ex officio a member of all committees, except the
examining committee and the trust audit committee. He shall have general
supervision and direction of the business, affairs and personnel of the bank. He
shall also have and may exercise such further powers and duties as from time to
time may be conferred upon, or assigned to him by the board.
SECTION 4.2. VICE CHAIRMAN OF THE BOARD. The board may appoint one
of its members to be vice chairman of the board. He shall perform such duties as
may from time to time be assigned to him by the board.
SECTION 4.3. PRESIDENT. The board shall appoint one of its members to
be president of the bank. He shall be the chief executive officer and the chief
administrative officer of the bank and in the absence of the chairman of the
board, he shall preside at any meeting of the board at which he is present. The
president shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulation, or practice
to the office of president, or imposed by these bylaws. He shall be ex officio a
member of all committees, except the examining committee and trust audit
committee. He shall have general supervision of the business, affairs and
personnel of the bank and in the absence of the chairman of the board, shall
exercise the powers and perform the duties of the chairman of the board. He
shall also have and may exercise such further powers and duties as from time to
time may be conferred upon or assigned to him by the board.
SECTION 4.4. SENIOR OFFICERS. The board may appoint one or more
executive vice presidents and one or more senior vice presidents. Each such
senior officer shall have such powers and duties as may be assigned to him by
the board, the chairman of the board, or the president.
SECTION 4.5. VICE PRESIDENT. The board may appoint one or more vice
presidents. Each vice president shall have such powers and duties as may be
assigned to him by the board, the chairman of the board, or the president.
SECTION 4.6. CASHIER. The board shall appoint a cashier who shall
have such powers and duties as may be assigned to him by the board, the chairman
of the board, or the president. The cashier shall be custodian of the corporate
seal, records, documents and papers of the bank. He shall provide for keeping of
proper records of all transactions of the bank.
SECTION 4.7. SECRETARY. The board shall appoint a secretary who shall
be secretary of the bank. He shall also perform such duties as may be assigned
to him from time to time by the board. The board may appoint a secretary of the
board who shall keep accurate minutes of all meetings. He shall attend to the
giving of all notices; he shall also perform such other duties as may be
assigned to him from time to time by the board.
SECTION 4.8. OTHER OFFICERS. The board may appoint one or more
assistant vice presidents, one or more trust officers, one or more assistant
secretaries, one or more assistant cashiers, and such other officers and
attorneys-in-fact as from time to time may appear to the board to be required or
desirable to transact the business of
4
<PAGE>
the bank. Such officers, respectively, shall exercise such powers and perform
such duties as pertain to their several offices or as may be conferred upon or
assigned to them by the board the chairman of the board or the president.
SECTION 4.9. CLERKS AND AGENTS. The chairman of the board, the
president, or any other active officer of the bank authorized by the chairman of
the board, or the president, may appoint and dismiss all or any paying tellers
receiving tellers note tellers, vault custodians, bookkeepers and other clerks,
agents and employees as they may deem advisable for the prompt and orderly
transaction of the business of the bank, define their duties, fix the salaries
to be paid them and the conditions of their employment.
SECTION 4.10. RESPONSIBILITY FOR MONEYS, ETC. Each of the active
officers and clerks of this bank shall be responsible for all moneys, funds
valuables and property of every kind and description that may from time to time
be entrusted to his care or placed in his hands by the board or others, or that
otherwise may come into his possession as an active officer or clerk of this
bank.
SECTION 4.11. SURETY BONDS. All the active officers and clerks of
this bank may be covered by one of the blanket form bonds customarily written by
the surety companies, drawn for such an amount, and executed by such surety
company, as the board may from time to time require, and duly approve; or at the
discretion of the board, all such active officers and clerks shall, each for
himself, give such bond, with such security, and in such denominations as the
board may from time to time require and direct. All bonds approved by the board
shall assure the faithful and honest discharge of the respective duties of such
active officer or clerk and shall provide that such active officer or clerk
shall faithfully apply and account for all moneys, funds, valuables and property
of every kind and description that may from time to time come into his hands or
be entrusted to his care, and pay over and deliver the same to the order of the
board or to such other person or persons as may be authorized to demand and
receive the same.
SECTION 4.12. TERM OF OFFICE - OFFICER DIRECTOR. The chairman of the
board, the vice chairman of the board and the president, together with any other
active officers who may be duly elected members of the board, shall hold their
respective offices for the current year for which the board (of which they shall
be members) was elected and until their successors are appointed, unless they
shall resign, be disqualified, or be removed; and any vacancy occurring in the
office of the chairman of the board, the vice chairman of the board, the
president, or in the board, shall, if required by these bylaws, be filled by the
remaining members.
SECTION 4.13. TERM OF OFFICE - OFFICER. The executive vice
presidents, the senior vice presidents, the vice presidents, the assistant vice
presidents, the cashier, the secretary, the trust officers and all other
officers and attorneys-in-fact who are not duly elected members of the board,
shall be appointed to hold their offices, respectively, during the pleasure of
the board.
ARTICLE V
TRUST DEPARTMENT
SECTION 5.1. TRUST DEPARTMENT. There shall be a department of the
bank known as the trust department which shall perform the fiduciary
responsibilities of the bank.
SECTION 5.2. TRUST OFFICER. There shall be a senior vice president
and trust officer, or vice president and trust officer of this bank, who shall
be designated as the managing officer of the trust department and whose duties
shall be to manage, supervise and direct all the activities of the trust
department. He shall do, or cause to be done, all things necessary or proper in
carrying on the business of the trust department in accordance with provisions
of law and regulations. He shall act pursuant to opinion of counsel where such
opinion is deemed necessary. Opinions of counsel shall be retained on file in
connection with all important matters pertaining to fiduciary activities. The
trust officer shall be responsible for all assets and documents held by the bank
in connection with fiduciary matters.
5
<PAGE>
The board may appoint such other officers of the trust department as it may deem
necessary, with such duties as may be assigned to them by the board, the
chairman of the board, or the president.
SECTION 5.3. TRUST INVESTMENT COMMITTEE. There shall be appointed by
the board a trust investment committee of this bank composed of not less than
four members, including members ex officio provided for in other sections of
these bylaws, who shall be capable and experienced officers or directors of the
bank. All investments of funds held in a fiduciary capacity shall be made,
retained or disposed of only with the approval of the trust investment
committee; and the committee shall keep minutes of all its meetings, showing the
disposition of all matters considered and passed upon by it. The committee
shall, promptly after the acceptance of an account for which the bank has
investment responsibilities, review the assets thereof, to determine the
advisability of retaining or disposing of such assets. The committee shall
conduct a similar review at least once during each calendar year thereafter and
within fifteen months of the last such review. A report of all such reviews,
together with the action taken as a result thereof, shall be noted in the
minutes of the committee. Three members of the trust investment committee shall
constitute a quorum, and any action approved by a majority of those present
shall constitute the action of the committee.
SECTION 5.4. TRUST AUDIT COMMITTEE. The board shall appoint a
committee of not less than three directors, including members ex officio
provided for in other sections of these bylaws, exclusive of any active officers
of the bank, which shall at least once during each calendar year and within
fifteen months of the last such audit make suitable audits of the trust
department, or cause suitable audits to be made, by auditors responsible only to
the board, and at such time shall ascertain whether the department has been
administered in accordance with law, Regulation 9, and sound fiduciary
principles. Notwithstanding the provisions of this Section, the board at any
time may assign to the Examining Committee, in addition to the duties of the
Examining Committee set forth in Section 3.3 of these bylaws, all of the duties
of the Trust Audit Committee and during such time as the Examining Committee is
performing the duties of both committees, the Trust Audit Committee shall cease
to function as a committee of this board. The board at any time may reassign the
duties provided for in this Section to the Trust Audit Committee.
SECTION 5.5. TRUST DEPARTMENT FILES. There shall be maintained in the
trust department, files containing all fiduciary records necessary to assure
that its fiduciary responsibilities have been properly undertaken and
discharged.
SECTION 5.6. TRUST INVESTMENTS. Funds held in a fiduciary capacity
shall be invested in accordance with the instrument establishing the fiduciary
relationship and local law. Where such instrument does not specify the character
and class of investments to be made and does not vest in the bank a discretion
in the matter, fund shield pursuant to such instrument shall be invested in
investments in which corporate fiduciaries may invest under local law.
ARTICLE VI
STOCK AND STOCK CERTIFICATES
SECTION 6.1. TRANSFERS. Shares of capital stock shall be transferable
on the books of the bank and a transfer book shall be kept in which all
transfers of stock shall be recorded. Every person becoming a shareholder be
such transfer shall in proportion to his shares, succeed to all rights and
liabilities of the prior holder of such shares.
SECTION 6.2. STOCK CERTIFICATES. Certificates of capital stock shall
bear the signature of any one of, the chairman of the board, or the president
(which may be engraved, printed or impressed) and shall be signed manually or by
facsimile process by the secretary, assistant secretary, cashier, assistant
cashier, or any other officer appointed by the board for that purpose, to be
known as an authorized officer and the seal of the bank shall be engraven
thereon. Each certificate shall recite on its face that the stock represented
thereby is transferable, properly endorsed, only on the books of the bank.
6
<PAGE>
ARTICLE VII
CORPORATE SEAL
SECTION 7.1. CORPORATE SEAL. The chairman of the board, the
president, the cashier, the secretary or any assistant cashier or assistant
secretary, or other officer thereunto designated by the board, shall have
authority to affix the corporate seal to any document requiring such seal, and
to attest the same. Such seal shall be substantially in the form set forth
herein.
ARTICLE VIII
INDEMNIFYING OFFICERS AND DIRECTORS
SECTION 8.1. INDEMNIFYING OFFICERS AND DIRECTORS. Any person, his
heirs, executors or administrators, may be indemnified or reimbursed by the bank
for reasonable expenses actually incurred in connection with any action, suit or
proceeding, civil or criminal, to which he or they shall be made a party by
reason of his being or having been a director, officer or employee of the bank
or of any firm, corporation or organization which he served in any such capacity
at the request of the bank; provided, however, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit or
proceeding as to which he shall finally be adjudged to have been guilty of or
liable for negligence or willful misconduct in the performance of his duties to
the bank; and, provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit or proceeding which
has been made the subject of a compromise settlement except with the approval of
a court of competent jurisdiction, or the holders of record of a majority of the
outstanding shares of the bank, or the board, acting by vote of directors not
parties to the same or substantially the same action suit or proceeding,
constituting a majority of the whole number of the directors. The foregoing
right of indemnification or reimbursement shall not be exclusive of other rights
to which such person, his heirs, executors or administrators, may be entitled as
a matter of law.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. FISCAL YEAR. The fiscal year of the bank shall be the
calendar year.
SECTION 9.2. EXECUTION OF INSTRUMENTS. All agreements, indentures
mortgages, deeds, conveyances transfers certificates declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
for the bank by the chairman of the board, or the vice chairman of the board, or
the president, or any executive vice president, or any senior vice president, or
any vice president, or the secretary or the cashier, or, if in connection with
the exercise of fiduciary powers of the bank by any of said officers or by any
officer in the trust department. Any such instruments may also be signed,
executed, acknowledged, verified, delivered or accepted for the bank in such
other manner and by such other officers as the board may from time to time
direct. The provisions of this Section 9.2 are supplementary to any other
provisions of these bylaws.
SECTION 9.3. RECORDS. The articles of association, the bylaws, and
the proceedings of all meetings of the shareholders and of the board shall be
recorded in appropriate minute books provided for the purpose; where these
bylaws so provide, the proceedings of standing committees of the board shall be
recorded in appropriate minute books provided for the purpose.
7
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ARTICLE X
EMERGENCIES
SECTION 10.1. CONTINUATION OF BUSINESS. In the event of a state of
emergency of sufficient severity to interfere with the conduct and management of
the affairs of this bank, the officers and employees will continue to conduct
the affairs of the bank under such guidance from the directors as may be
available except as to matters which by statute require specific approval of the
board of directors and subject to conformance with any governmental directives
during the emergency.
SECTION 10.2. DESIGNATION OF PLACE OF BUSINESS. The offices of the
bank at which its business shall be conducted shall be the main office thereof
located at 135 South LaSalle Street, Chicago, Illinois, and any other legally
authorized location which may be leased or acquired by this bank to carry on its
business. During an emergency resulting in any authorized place of business of
this bank being unable to function, the business ordinarily conducted at such
location shall be relocated elsewhere in suitable quarters, in addition to or in
lieu of the locations heretofore mentioned, as may be designated by the board of
directors or by the executive committee or by such persons as are then, in
accordance with resolutions adopted from time to time by the board of directors
dealing with the exercise of authority in the time of such emergency, conducting
the affairs of this bank. Any temporarily relocated place of business of this
bank shall be returned to its legally authorized location as soon as practicable
and such temporary place of business shall then be discontinued.
ARTICLE XI
BYLAWS
SECTION 11.1 INSPECTION. A copy of the bylaws with all amendments
thereto, shall at all times be kept in a convenient place at the main office of
the bank and shall be open for inspection to all shareholders, during banking
hours.
SECTION 11.2 AMENDMENTS. The bylaws may be amended, altered or
repealed, at any regular meeting of the board, by a vote of a majority of the
whole number of the directors.
***
I........................................... hereby certify that I am
the................................ Cashier/Secretary of LaSalle National Bank,
Chicago, Illinois and that the foregoing is a true and correct copy of the
bylaws of this bank as amended and that the same are in full force and effect
............. day of...................19........
...............................
Cashier/Secretary.
December 15, 1982
(SEAL)
8
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EXHIBIT 5
NOT APPLICABLE
<PAGE>
EXHIBIT 6
LaSalle National Bank hereby consents in accordance with the provisions of
Section 321(b) of the Trust Indenture Act of 1939, that reports of examinations
by Federal, State, Territorial and District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon its request therefor.
LaSalle National Bank
By: /s/ D. Swanson
---------------
Diane Swanson
Assistant Vice President
<PAGE>
EXHIBIT 7
Latest Report of Condition of
Trustee published pursuant to
law or the requirement of its
surviving or examining authority.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
LaSalle National Bank Call Date: 9/30/97 ST-BK: 17-1520 FFIEC 031
135 South LaSalle Street Page RC-1
Chicago, Il. 60603 Vendor ID: D CERT: 16407 11
</TABLE>
Transit Number: 71000505
Consolidated Report of Condition for Insured Commercial and State-Chartered
Savings Banks for September 30, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC-Balance Sheet
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A) RCFD
----
a. Noninterest-bearing balances and currency and coin (1) 0081 804,023 1.a
b. Interest-bearing balances and currency in cash (1) 0071 634 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 962,382 2.a
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 3,463,261 2.b
3. Federal funds sold and securities purchased under agreements to resell 1350 86,026 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income RCFD
----
(from Schedule RC-C) 2122 10,093,581 4.a
b. LESS: Allowance for loan and lease losses 3123 191,670 4.b
c. LESS: Allocated transfer risk reserve 3128 0 4.c
d. Loans and leases, net of unearned income
allowance, and reserve (item 4.a minus 4.b and 4.c) 2125 9,901,911 4.d
5. Trading assets (from Schedule RC-D) 3545 153,080 5.
6. Premises and fixed assets (including capitalized leases) 2145 50,587 6.
7. Other real estate owned (from Schedule RC-M) 2150 3,148 7.
8. Investments in unconsolidated subsidiaries and associated companies (from
Schedule RC-M) 2130 0 8.
9. Customers liability to this bank on acceptances outstanding 2155 10,561 9.
10. Intangible assets (from Schedule RC-M) 2143 20,508 10.
11. Other assets (from Schedule RC-F) 2160 265,509 11.
12. Total assets (sum of items 1 through 11) 2170 15,721,630 12.
</TABLE>
___________________________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
LaSalle National Bank Call Date: 9/30/97 ST-8K: 17-1520 FFIEC 031
135 South LaSalle Street Page RC-2
Chicago, IL. 60603 Vendor ID: D CERT: 19407 12
</TABLE>
Transit Number: 71000505
Schedule RC - Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of RCON
----
columns A and C from Schedule RC-E, part 1) 2200 7,963,762 13.a
RCON
----
(1) Noninterest-bearing (1) 6631 1,938,866 13.a1
(2) Interest-bearing 6638 6,024,916 13.a2
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from RCFN
----
Schedule RC-E, part ii) 2200 2,064,214 13.b
RCFN
----
(1) Noninterest-bearing 6631 0 13.b.1
(2) Interest-bearing 6636 2,064,214 13.b.2
RCFD
----
14. Federal funds purchased and securities sold under agreements to repurchase 2800 1,629,735 14.
RCON
----
15. a. Demand notes issued to the U.S. Treasury 2840 639,397 15.a
RCFD
----
b. Trading liabilities (from Schedule RC-D) 3548 58,051 15.b
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
a. With a remaining maturity of one year or less 2332 1,562,441 16.a
b. With a remaining maturity of more than one year through three years
A547 12,481 16.a
c. With a remaining maturity of more than three years A548 15,051 15.b
17. Not applicable
18. Bank's liability on acceptances executed and outstanding 2920 10,561 18.
19. Subordinated notes and debentures (2) 3200 396,250 19.
20. Other liabilities (from Schedule RC-G) 2930 333,248 20.
21. Total liabilities (sum of items 13 through 20) 2948 14,685,847 21.
22. Not applicable
EQUITY CAPITAL
RCFD
----
23. Perpetual preferred stock and related surplus 3838 0 23.
24. Common stock 3230 18,417 24.
25. Surplus (exclude all surplus related to preferred stock) 3839 275,636 25.
26. a. Undivided profits and capital reserves 3632 705,511 25.a
b. Net unrealized holding gains (losses) on available-for-sale securities 3434 36,119 25.b
27. Cumulative foreign currency translation adjustments 3284 0 27.
28. Total equity capital (sum of items 23 through 27) 3210 1,035,783 28.
29. Total liabilities and equity capital (sum of items 21 and 28) 3300 15,721,630 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that
best describes the most comprehensive level of auditing work performed for RCFD Number
---- ------
the bank by independent external auditors as of any data during 1998. 6724 N/A M1
1= Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2= Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3= Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4= Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5= Review of the bank's financial statements by external auditors
6= Compilation of the bank's financial statements by external auditors
7= Other audit procedures (excluding tax preparation work)
8= No external audit work
</TABLE>
_____________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus
<PAGE>
EXHIBIT 8
Not Applicable
<PAGE>
EXHIBIT 9
Not Applicable
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
THE GSI GROUP, INC.
Offer to Exchange
All 10 1/4% Senior Subordinated Notes due 2007
which have been registered under the Securities Act of 1933
for all Outstanding 10 1/4% Senior Subordinated Notes due 2007
Pursuant to the Prospectus Dated , 1998.
----------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED (THE "EXPIRATION DATE").
----------------------------------------------------------
The Exchange Agent
for the Exchange Offer is:
LaSalle National Bank
By Hand, Registered or Certified Mail or Overnight Courier:
LaSalle National Bank
135 South LaSalle Street
Room 1825
Chicago, Illinois 60603
Attention: Diane Swanson
By Facsimile:
(312) 904-2236
Attention: Diane Swanson
Confirm by Telephone: (312) 904-2936
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID
DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
The undersigned hereby acknowledges receipt of the Prospectus dated
December , 1998 (as it may be amended or supplemented from time to time, the
"Prospectus") of The GSI Group, Inc., a Delaware corporation (the "Company"),
and this Letter of Transmittal, which together constitute the Company's offer
(the "Exchange Offer") to exchange an aggregate of up to $100,000,000 principal
amount of its 10 1/4% Senior Subordinated Notes due 2007 (the "New Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which the Prospectus
is a part, an identical principal amount of its outstanding 10 1/4% Senior
Subordinated Notes due 2007 (the "Old Notes"). The term "Expiration Date" shall
mean 5:00 p.m., New York City time on , 1998, unless the Exchange
Offer is extended, in which case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is extended. Capitalized terms used
but not defined herein have the meaning given to them in the Prospectus.
This Letter of Transmittal is to be used (i) if certificates of Old Notes
are to be forwarded herewith, (ii) if delivery of Old Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company (the "Depository" or "DTC") pursuant to the procedures
set forth in "The Exchange Offer--Procedures for Tendering Old Notes" in the
Prospectus or (iii) if tender of the Old Notes is to be made according to the
guaranteed delivery procedures described in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures."
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal or any other documents required by this Letter of Transmittal to the
Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete
the procedure for book-entry transfer on a timely basis, may tender their Old
Notes according to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 2.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, list the certificate numbers and
principal amount on a separate signed schedule and attach that schedule to this
Letter of Transmittal. See Instruction 4.
<TABLE>
<CAPTION>
ALL TENDERING HOLDERS COMPLETE THIS BOX:
- ------------------------------------------------------------------------------------------------------------------
Description of Old Notes Tendered
- ------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder
(Fill in, if blank) Old Notes Tendered
- ------------------------------------------------------------------------------------------------------------------
Aggregate
Certificate or Principal Amount
Registration Represented by Principal Amount
Number(s)* Old Notes Tendered **
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
Total Amount Tendered: $ $
- ------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders. Such holders should check the appropriate box below and provide
the requested information.
** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount
represented by such Old Notes. All tenders must be in integral multiples of $1,000.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this letter in its entirety.
(THE FOLLOWING BOXES ARE TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY.)
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution:_____________________________________________
DTC Account Number:________________________________________________________
Transaction Code Number:___________________________________________________
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):___________________________________________
Date of Execution of Notice
of Guaranteed Delivery:____________________________________________________
Name of Eligible Institution Which Guaranteed Delivery:____________________
If Guaranteed Delivery is to be made by book-entry transfer:
DTC Account Number:________________________________________________________
Transaction Code Number:___________________________________________________
[_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OLD NOTES FOR YOUR OWN
ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES
(A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES
OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:______________________________________________________________________
Address:___________________________________________________________________
___________________________________________________________________
Telephone Number and Contact Person:_______________________________________
-3-
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above described principal amount
of Old Notes in exchange for an identical principal amount of New Notes.
Subject to, and effective upon, the acceptance for exchange of the Old Notes
tendered herewith, the undersigned hereby exchanges, assigns and transfers to or
upon the order of the Company all right, title and interest in and to such Old
Notes as are being tendered herewith, including all rights to accrued and unpaid
interest thereon as of the Expiration Date. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent is also acting as agent of the
Company in connection with the Exchange Offer) to cause the Old Notes to be
assigned, transferred and exchanged.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, ASSIGN AND TRANSFER THE OLD NOTES
TENDERED HEREBY AND TO ACQUIRE NEW NOTES ISSUABLE UPON THE EXCHANGE OF SUCH
TENDERED OLD NOTES, AND THAT, WHEN THE OLD NOTES ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD
NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY.
THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "The Exchange Offer--Procedures for Tendering Old
Notes" in the Prospectus and in the instructions herein will, upon the Company's
acceptance for exchange of such tendered Old Notes, constitute a binding
agreement between the undersigned and the Company upon the terms and subject to
the conditions of the Exchange Offer.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Old Notes or transfer ownership of such Old Notes on the account books
maintained by a book-entry transfer facility. The undersigned further agrees
that acceptance of any tendered Old Notes by the Company and the issuance of New
Notes in exchange therefor shall constitute performance in full by the Company
of its obligations under the Registration Rights Agreement and that the Company
shall have no further obligations or liabilities thereunder for the registration
of the Old Notes or the New Notes.
The Exchange Offer is not conditioned upon any principal amount of Old
Notes being tendered for exchange. However, the Exchange Offer is subject to
certain conditions set forth in the Prospectus under the caption "The Exchange
Offer--Conditions." The undersigned recognizes that as a result of these
conditions (which may be waived, in whole or in part, by the Company), as more
particularly set forth in the Prospectus, the Company may not be required to
exchange any of the Old Notes tendered hereby and, in such event, the Old Notes
not exchanged will be returned to the undersigned at the address shown below the
signature of the undersigned.
The name(s) and addressee(s) of the registered holder(s) of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
The undersigned acknowledges that this Exchange Offer is being made in
reliance on the position of the staff of the Security and Exchange Commission
(the "Commission") as set forth in certain interpretive letters addressed to
third parties in other transactions substantially similar to the Exchange Offer,
which lead the Company to believe that New Notes issued pursuant to the Exchange
Offer to a holder in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by a holder (other than (i) a broker-dealer who
purchased Old
-4-
<PAGE>
Notes directly from the Company for resale pursuant to Rule 144A or any other
available exemption under the Securities Act, (ii) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act, or (iii) a broker-
dealer who acquired the Old Securities as a result of market-making or other
trading activities) without further compliance with the registration and
prospectus delivery provisions of the Securities Act, provided, that such holder
is acquiring the New Notes in the ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the New Notes. Accordingly, the undersigned
represents that (i) it is not an "affiliate" of the Company as defined in Rule
405 of the Securities Act, (ii) it is not a broker-dealer that acquired Old
Notes directly from the Company in order to resell them pursuant to Rule 144A of
the Securities Act or any other available exemption under the Securities Act,
(iii) it will acquire the New Notes in the ordinary course of business and (iv)
it is not participating, and has no arrangement or understanding with any person
to participate, in the distribution of the New Notes. The undersigned
acknowledges that if it is unable to make these representations to the Company,
it will not be able to rely on the interpretations of the staff of the
Commission described above and therefore will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Notes unless such sale is
made pursuant to an exemption from such requirements. If the undersigned is a
broker-dealer that will receive New Notes for its own account in exchange for
Old Notes, it represents that it acquired the Old Notes for its own account as a
result of market-making activities or other trading activities and acknowledges
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such New Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of Section 2(11) of the Securities
Act. Failure to comply with any of the above-mentioned requirements could result
in the undersigned or any such other person incurring liability under the
Securities Act for which such persons are not indemnified by the Company.
Unless otherwise indicated in the box entitled "Special Exchange
Instruction" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, certificates for all New Notes delivered in exchange for
tendered Old Notes, and any Old Notes delivered herewith but not exchanged, will
be registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If a
New Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the New Note is to be mailed to someone other than
the person(s) signing this Letter of Transmittal or to the person(s) signing
this Letter of Transmittal at an address different than the address shown on
this letter of Transmittal, the appropriate boxes of this Letter of Transmittal
should be completed. If Old Notes are surrendered by holder(s) that have
completed either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" in this Letter of Transmittal,
signature(s) on this Letter of Transmittal must be guaranteed by an Eligible
Institution (as defined in Instruction 2).
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Tendered Old
Notes may be withdrawn in accordance with Instruction 3 hereto at any time prior
to the Expiration Date.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES
TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD
NOTES AS SET FORTH IN SUCH BOX.
-5-
<PAGE>
REGISTERED HOLDERS OF OLD NOTES SIGN HERE
(IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 BELOW)
PLEASE SIGN HERE PLEASE SIGN HERE
______________________________________ ______________________________________
Authorized Signature of Authorized Signature of
Registered Holder Registered Holder
Must be signed by registered holder(s) exactly as name(s) appear(s) on the Old
Notes or on a security position listing as the owner of the Old Notes or by
person(s) authorized to become registered holder(s) by properly completed bond
powers transmitted herewith. See Instruction 4. If signature is by attorney-
in-fact, trustee, executor, administrator, guardian, officer of a corporation or
other person acting in a fiduciary capacity, please provide the following
information:
Name:_________________________________ Name:_________________________________
Title:________________________________ Title:________________________________
Address:______________________________ Address:______________________________
______________________________________ ______________________________________
Telephone Number:_____________________ Telephone Number:_____________________
Dated:________________________________ Dated:________________________________
______________________________________ ______________________________________
Taxpayer Identification or Taxpayer Identification or
Social Security Number Social Security Number
-6-
<PAGE>
- --------------------------------------------------------------------------------
Signature Guarantee
(If required--see Instruction 4)
Signature(s) Guaranteed by an
Eligible Institution:____________________________ Date:_____________________
Authorized Signature
Name of Eligible Institution
Guaranteeing Signature:__________________________
Address:______________________________
Capacity (full title):________________ ______________________________________
Telephone Number:_____________________ ______________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL EXCHANGE INSTRUCTIONS
(See Instructions 4 and 5)
To be completed ONLY if the New Notes or any Old Notes that are not tendered or
not accepted are to be issued in the name of someone other than the undersigned.
Issue:
[_] New Notes to:
[_] Old Notes, to:
Name(s)_________________________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
Telephone Number:_______________________________________________________________
Book-Entry Transfer Facility Account:___________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Tax Identification or Social Security Number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4 and 5)
To be completed ONLY if the New Notes or any Old Notes that are not tendered or
not accepted are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that shown above under "Description of Old
Notes Tendered."
Mail:
[_] New Notes to:
[_] Old Notes, to:
Name(s)_________________________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
Telephone Number:_______________________________________________________________
________________________________________________________________________________
(Tax Identification or Social Security Number)
- --------------------------------------------------------------------------------
-7-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
All physically delivered Old Notes or confirmation of any book-entry
transfer to the Exchange Agent's account at DTC, as well as a properly completed
and duly executed copy of this Letter of Transmittal (or facsimile thereof), and
any other documents required by this Letter of Transmittal, must be received by
the Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date. The method of delivery of this Letter of Transmittal, the Old
Notes and all other required documents is at the election and risk of the
holder. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. Except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
Any beneficial holder whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Old Notes in the Exchange Offer should contact such registered holder
promptly and instruct such registered holder to tender on such beneficial
holder's behalf. If such beneficial holder wishes to tender directly, such
beneficial holder must, prior to completing and executing the Letter of
Transmittal and tendering Old Notes, either make appropriate arrangements to
register ownership of the Old Notes in such beneficial holder's own name or
obtain a properly completed bond power from the registered holder. Beneficial
holders should be aware that the transfer of registered ownership may take
considerable time.
Delivery to an address other than as set forth herein, or instructions via
a facsimile number other than the ones set forth herein, will not constitute a
valid delivery.
The Company expressly reserves the right, at any time or from time to time,
to extend the Expiration Date by complying with certain conditions set forth in
the Prospectus.
LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE COMPANY OR TO DTC.
2. GUARANTEED DELIVERY PROCEDURES.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date or (iii) who cannot complete the procedures for book-entry
transfers on a timely basis, may effect a tender if:
a. the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent
in the United States or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution");
b. prior to the Expiration Date, the Exchange Agent receives from
such holder and the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail or
hand delivery) setting forth the name and address of the holder of the Old
Notes, the certificate or registration number(s) of the tendered Old Notes,
and the principal amount of Old Notes tendered, stating that the tender is
being made thereby and guaranteeing that, at least within four (4) New York
Stock Exchange trading days after the Expiration Date, the tendered Old
Notes, a duly executed Letter of Transmittal and any other documents
required by the Letter of Transmittal (or facsimile thereof), will be
deposited by the Eligible Institution with the Exchange Agent; and
-8-
<PAGE>
c. such properly completed and executed documents required by the
Letter of Transmittal (or facsimile thereof) and tendered Old Notes in
proper form for transfer (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC) must be received by the
Exchange Agent at least within four (4) New York Stock Exchange trading
days after the Expiration Date.
Any holder who wishes to tender Old Notes pursuant to the guaranteed
delivery procedures described above must ensure that the Exchange Agent receives
the Notice of Guaranteed Delivery relating to such Old Notes prior to the
Expiration Date. Failure to complete the guaranteed delivery procedures
outlined above will not, of itself, affect the validity or effect a revocation
of any Letter of Transmittal form properly completed and executed by a holder
who attempted to use the guaranteed delivery procedures.
3. PARTIAL TENDERS; WITHDRAWALS.
Tenders of Old Notes will be accepted only in integral multiples of $1,000
principal amount at maturity. If less than the entire principal amount of Old
Notes evidenced by a submitted certificate is tendered, the tendering holder
should fill in the principal amount tendered in the column entitled "Principal
Amount Tendered" of the box entitled "Description of Old Notes Tendered." A
newly issued Old Note for the principal amount of Old Notes submitted but not
tendered will be sent to such holder, unless the appropriate boxes on this
Letter of Transmittal are completed, as soon as practicable after the Expiration
Date. All Old Notes delivered to the Exchange Agent will be deemed to have been
tendered in full unless otherwise indicated.
Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date, after which tenders of Old Notes are
irrevocable. To withdraw a tender of Old Notes in the Exchange Offer, a written
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent by 5:00 p.m., New York City time, on the Expiration Date. Any such notice
of withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate or registration number(s) and principal
amount of such Old Notes, or, in the case of Old Notes transferred by book-entry
transfer, the name and number of the account at DTC to be credited), (iii) be
signed by the Depositor in the same manner as the original signature on this
Letter of Transmittal (including any required signature guarantees) or be
accompanied by a bond power in the name of the person withdrawing the tender, in
satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered holder, with the signature thereon guaranteed by a
Eligible Institution together with the other documents required upon transfer by
the Indenture, (iv) specify the name in which such Old Notes are to be
registered, if different from that of the Depositor, pursuant to such documents
of transfer, and (v) include a statement that such holder is withdrawing his
election to have such Old Notes exchanged. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Company, in its sole discretion, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no New
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as promptly as practicable after withdrawal.
4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration or enlargement or any
change whatsoever. If this Letter of Transmittal is signed by a participant in
DTC, the signature must correspond with the name as it appears on the security
position listing as the owner of the Old Notes.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
-9-
<PAGE>
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
Signatures on this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the Old Notes
tendered hereby are tendered (i) by a registered holder who has not completed
the box entitled "Special Exchange Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If this Letter of Transmittal is signed by the registered holder or holders
of Old Notes (which term, for the purposes described herein, shall include a
participant in DTC whose name appears on a security listing as the owner of the
Old Notes) listed and tendered hereby, no endorsements of the tendered Old Notes
or separate written instruments of transfer or exchange are required. In any
other case, the registered holder (or acting holder) must either properly
endorse the Old Notes or transmit properly completed bond powers with this
Letter of Transmittal (in either case executed exactly as the name(s) of the
registered holder(s) appear(s) on the Old Notes, and, with respect to a
participant in DTC whose name appears on a security position listing as the
owner of Old Notes, exactly as the name of the participant appears on such
security position listing), with the signature on the Old Notes or bond power
guaranteed by an Eligible Institution (except where the Old Notes are tendered
for the account of an Eligible Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
5. SPECIAL EXCHANGE AND DELIVERY INSTRUCTIONS.
Tendering holders should indicate, in the applicable box, the name and
address (or account at DTC) in which the New Notes or Old Notes for principal
amounts not tendered or not accepted for exchange are to be issued and delivered
(or deposited), if different from the names and addresses or accounts of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification number or social security number of
the person named must also be indicated and the tendering holder should complete
the applicable box.
If no instructions are given, the New Notes (and any Old Notes not tendered
or not accepted) will be issued in the name of and delivered to the acting
holder of the Old Notes or deposited at such holder's account at the Depository.
6. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchanged Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Old Notes listed in the Letter of
Transmittal.
-10-
<PAGE>
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or in part, any
of the specified conditions to the Exchange Offer set forth in the Prospectus.
8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal may be
directed to the Exchange Agent at the address and telephone number set forth
above.
10. VALIDITY AND FORM.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject
any and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Old Notes either before
or after the Expiration Date (including the right to waive the ineligibility of
any holder who seeks to tender Old Notes in the Exchange Offer). The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in this Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Old Notes must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person shall
be under any duty to give notification of defects or irregularities with respect
to tenders of Old Notes, nor shall any of them incur any liability for failure
to give such notification. Tenders of Old Notes will not be deemed to have been
made until such irregularities have been cured or waived. Any Old Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
without cost to such holder by the Exchange Agent to the tendering holders of
Old Notes, unless otherwise provided herein, as soon as practicable following
the Expiration Date.
11. IMPORTANT TAX INFORMATION
Under U.S. federal income tax law, a holder tendering Old Notes is required
to provide the Exchange Agent with such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 above. If such holder is an individual,
the TIN is the holder's social security number. The Certificate of Awaiting
Taxpayer Identification Number should be completed if the tendering holder has
not been issued a TIN and has applied for a number or intends to apply for a
number in the near future. If the Exchange Agent is not provided with the
correct TIN, the holder may be subject to a $50 penalty imposed by the Internal
Revenue Service. In addition, payments that are made to such holder with
respect to tendered Old Notes may be subject to backup withholding.
Certain holders (including, among others, all domestic corporations and
certain foreign individuals and foreign entities) are not subject to these
backup withholding and reporting requirements. Such a holder who satisfies one
or more of the conditions set forth in Part 2 of the Substitute Form W-9 should
execute the certification following such Part 2. In order for a foreign holder
to qualify as an exempt recipient, that holder must submit to the Exchange Agent
a properly completed Internal Revenue Service Form W-9, signed under penalties
of perjury, attesting to that holder's exempt status. A copy of such form is
attached to this Letter of Transmittal.
-11-
<PAGE>
If backup withholding applies, the Exchange Agent is required to withhold
31% of any amounts otherwise payable to the holder. Backup withholding is not
an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
To prevent backup withholding on payments that are made to a holder with
respect to Old Notes tendered for exchange, the holder is required to notify the
Exchange Agent of his or her correct TIN by completing the form herein
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
holder is awaiting a TIN) and that (i) such holder is exempt, (ii) such holder
has not been notified by the Internal Revenue Service that he or she is subject
to backup withholding as a result of failure to report all interest or dividends
or (iii) the Internal Revenue Service has notified such holder that he or she is
no longer subject to backup withholding.
Each holder is required to give the Exchange Agent the social security
number or employer identification number of the record holder(s) of the Old
Notes. If Old Notes are in more than one name or are not in the name of the
actual holder, consult the instructions on Internal Revenue Service Form W-9,
which are attached to this Letter of Transmittal, for additional guidance on
which number to report.
If the tendering holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN on Substitute Form W-9, sign and date the form and the
Certificate of Awaiting Taxpayer Identification Number and return them to the
Exchange Agent. If such certificate is completed and the Exchange Agent is not
provided with the TIN within 60 days, the Exchange Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Exchange Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE
AGENT ON OR PRIOR TO THE EXPIRATION DATE.
-12-
<PAGE>
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS:
PAYOR'S NAME: THE GSI GROUP, INC.
- --------------------------------------------------------------------------------
SUBSTITUTE
Form W-9
Department of the Treasury
Internal Revenue Service
Payor's Request for Taxpayer's Identification Number (TIN)
Part 1--PLEASE PROVIDE YOUR TIN ON THE Social security number or
LINE AT RIGHT AND CERTIFY BY SIGNING Employer identification number
AND DATING BELOW ______________________________
- --------------------------------------------------------------------------------
Part 2--CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me);
(2) I am not subject to backup withholding either because: (a) I am exempt from
backup withholding; (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends; or (c) the IRS has notified me
that I am no longer subject to backup withholding; and
(3) Any other information provided on this form is true and correct.
Certification Instructions--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return and you have not been
notified by the IRS that you are no longer subject to backup withholding.
- --------------------------------------------------------------------------------
SIGNATURE____________________________________________ Part 3--
Awaiting TIN [_]
DATE_________________________________________________
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
payments made to me on account of the Exchange Notes shall be retained until I
provide a taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
SIGNATURE:_____________________________________ DATE:_________________________
- --------------------------------------------------------------------------------
-13-
<PAGE>
Exhibit 99.2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer.
Social Security numbers have nine digits separated by two hyphens: i.e, 000-00-
0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
--------------------------------------------------- ---------------------------------------------
For this type Give the SOCIAL For this type Give the EMPLOYER
of account: SECURITY number of account: IDENTIFICATION
of- number of-
--------------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C>
1. Individual The individual 6. Sole proprietorship The owner/1/
2. Two or more The actual owner of the 7. A valid trust, estate, Legal entity/3/
individuals (joint account or, if combined or pension trust
account) funds, the first
individual on the
account./2/
8. Corporate The corporation
3. Custodian account of a The minor/4/ 9. Association, club, The organization
minor (Uniform Gift to religious, charitable,
Minors Act) educational or other
tax-exempt organization
10. Partnership The partnership
4.a. The usual revocable The grantor-trustee/2/ 11. A broker or registered The broker or nominee
savings trust (grantor nominee
is also trustee)
b. So-called trust The actual owner/2/ 12. Account with the The public entity
account that is not a Department of
legal or valid trust Agriculture in the
under State law name of a public
entity (such as a
State or local
5. Sole proprietorship The owner/1/ government, school
district, or prison)
that receives
agricultural program
payments
- -----------------------
</TABLE>
/1/ You must show your individual name, but you may also enter your business
or "doing business as" name. Or may use either your SSN or EIN.
/2/ List first and circle the name of the person whose number you furnish.
/3/ List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the identifying number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title).
/4/ Circle the minor's name and furnish the minor's social security number.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
Payees Exempt from Backup Withholding
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisers Act
of 1940 U.C. who regularly acts s a broker are exempt. Payments subject to
reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except a
corporation that provides medical and health care services or bills and collects
payments for such services is not exempt from backup withholding or information
reporting. Only payees described in items (2) through (6) are exempt from
backup withholding for barter exchange transactions and patronage dividends.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan or custodial account under section 403(b)(7).
(3) The United States or any agency or instrumentality thereof.
(4) A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
(5) A foreign government, a political subdivision of a foreign government, or
an agency or instrumentality thereof.
(6) An international organization or any agency or instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times under the Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc. Nominee List.
(15) An exempt charitable remainder trust, or a non-exempt trust described in
section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payment of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
. Section 404(k) payments made by an ESOP.
Interest payments that are generally exempt from back-up withholding include:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, royalties, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice. Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number. If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Civil Penalty for False Information with Respect to Withholding. If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Exhibit 99.3
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
THE GSI GROUP, INC.
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, and the related Letter of Transmittal (the "Letter of Transmittal") must
be used to accept the Exchange Offer (as defined below) of The GSI Group, Inc.,
a Delaware corporation (the "Company"), made pursuant to the Prospectus, dated
, 1998 (as it may be amended or supplemented from time to time, the
"Prospectus"), if certificates for the outstanding 10 1/4% Senior Subordinated
Notes due 2007 of the Company (the "Old Notes") are not immediately available,
or time will not permit the Letter of Transmittal (together with the documents
required by such Letter of Transmittal) to reach LaSalle National Bank (the
"Exchange Agent") on or prior to 5:00 p.m., New York City time, on the
Expiration Date (as defined herein), or if Holders cannot complete the procedure
for book-entry transfer on a timely basis. Such form may be delivered or
transmitted by telegram, telex, facsimile transmission, mail or hand delivery to
the Exchange Agent as set forth below. In addition in order to utilize the
guaranteed delivery procedure to tender the Old Notes pursuant to the Exchange
Offer, a completed signed and dated Letter of Transmittal (or facsimile thereof)
must also be received by the Exchange Agent prior to 5:00 p.m., New York City
time, at least within four New York Stock Exchange trading days after the
Expiration Date. Capitalized terms not defined herein are defined in the
Prospectus.
----------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
----------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
LaSalle National Bank
By Hand, Registered or Certified Mail or Overnight Courier:
LaSalle National Bank
135 South LaSalle Street
Room 1825
Chicago, Illinois 60603
Attention: Diane Swanson
By Facsimile:
(312) 904-2236
Attention: Diane Swanson
Confirm by Telephone: (312) 904-2936
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF
GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the Letter of Transmittal
(which together constitute the "Exchange Offer"), receipt of which are hereby
acknowledged, the aggregate principal amount of Old Notes set forth below
pursuant to the guaranteed delivery procedure described in "The Exchange Offer--
Guaranteed Delivery Procedures" section in the Prospectus and Instruction 2 of
the Letter of Transmittal.
Name(s) of Registered Holder(s):
-----------------------------------------------
(Please Print or Type)
Principal Amount of Old Notes Tendered:* Certificate No(s). (if available):
$
-------------------------------------- ----------------------------------
$
-------------------------------------- ----------------------------------
$
-------------------------------------- ----------------------------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
If Old Notes will be delivered by book-entity transfer to The Depository
Trust Company ("DTC"), provide the DTC account number.
DTC Account Number:
---------------------------------
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, legal representatives, successors and
assigns of the undersigned.
PLEASE SIGN HERE
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery.
- ------------------------------------------------- --------------------------
- ------------------------------------------------- --------------------------
Signature(s) of Holder(s) or Authorized Signatory Date
Area Code and Telephone Number:
-------------------------------
If signature is by a trustee, executor, administrator, guardian, attorney-
in-fact, officer or other person acting in a fiduciary or representative
capacity, such person must set forth his or her full title below.
Please print name(s) and address(es)
Name(s) of Holder(s)
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
Title/Capacity:
-----------------------------------------------------------
Address(es):
-----------------------------------------------------------
-2-
<PAGE>
GUARANTEE
(Not to be Used for Signature Guarantee)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or a correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, hereby guarantees that the
undersigned will deliver to the Exchange Agent the certificates representing the
Old Notes being tendered hereby in proper form for transfer (or a confirmation
of book-entry transfer of such Old Notes into the Exchange Agent's account at
the book-entry transfer facility of DTC) with delivery of a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, all within four
New York Stock Exchange trading days after the Expiration Date.
Name of Firm
------------------------------ ------------------------------
(Authorized Signature)
Address Name
----------------------------------- -------------------------
Please Print or Type
- ------------------------------------------- Title
Zip Code ------------------------
Dated
Telephone Number ------------------------
--------------------------
The institution that completes this form must communicate the guarantee to
the Exchange Agent and must deliver the certificates representing any Old Notes
(or a confirmation of book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC) and the Letter of Transmittal to the Exchange Agent
within the time period shown herein. Failure to do so could result in a
financial loss to such institution.
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES FOR OLD
NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
-3-
